When the Fed sells short-term bonds and buys long-term bonds,it is engaging in
A)changing the discount rate.
B)forward guidance.
C)quantitative easing.
D)a maturity extension program.

Question

Quizplus · Accepted Answer

When the Fed sells short-term bonds and buys long-term bonds, it is engaging in a maturity extension program. This is a form of monetary policy known as Operation Twist. The aim of Operation Twist is to flatten the yield curve by reducing long-term interest rates relative to short-term interest rates. This can encourage borrowing and investment, which can stimulate economic growth.

When the Fed Sells Short-Term Bonds and Buys Long-Term Bonds,it