What is a reverse repurchase agreement? How does the Fed use reverse repurchase agreements to target the federal funds rate?
What will be an ideal response?
A reverse repurchase agreement involves the Fed selling a security to a financial firm with the promise to buy the security back the next day. The Fed is, in effect, borrowing funds overnight from the firm that purchases the security. By raising the interest rate it is willing to pay on these loans, the Fed reduces the willingness of the financial firms it deals with in these transactions to lend at a lower rate, thereby setting a lower limit on the federal funds rate target.
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A fixed exchange rate system crisis may be accompanied or followed by
A) unexpected gains of international reserves. B) revaluation of a currency. C) devaluation of a currency. D) gains in comparative advantage. E) deflationary pressures within the country.
Higher energy prices can be used to explain the productivity slowdown in the period from
A. 1948 to 1973. B. 1973 to 1995. C. 1973 to 1980. D. 1995 to 2000.
When the representatives of the OPEC countries met in March 1999 and decided to reduce the amount of oil each country would produce, the result was
A. the world demand for oil fell. B. the world supply of oil fell. C. the price of oil fell. D. All of the choices were results of this meeting.
There is a 10 percent decrease in the price of plastic used by a firm that make more toys. This causes
A. a decrease in the supply of toys. B. an increase of the quantity supplied of toys. C. a decrease in the quantity of toys supplied. D. an increase in the supply of toys.