Explain dynamic and defensive open market operations. What is the purpose of each type? Describe two situations when defensive open market operations are used. How are defensive open market operations typically conducted?
What will be an ideal response?
Dynamic OMOs are used to permanently change the monetary base and money supply. Defensive operations are used to offset temporary changes in the monetary base and/or money supply. Defensive operations are used to offset float, shifts in Treasury balances into or out of the Fed, and temporary changes in currency. Defensive purchases are typically conducted by using repurchase agreements, while reverse repos or matched sale-purchase transactions are used to conduct defensive open market sales.
You might also like to view...
Which of the following is an asset of a family?
A. Unpaid credit card balance B. Mortgage C. Checking account balance D. Student loan
Recently a teachers' union argued that the standard of living of teachers working for the school district was falling. The negotiating team for the school board replied that this was not true because the teachers had received significant increases in nominal income through collective bargaining. Could the union statement be correct?
A. Yes, because real income may fall if price increases are proportionately smaller than the increases in nominal income. B. No, because real income may rise if price increases are proportionately greater than declines in nominal income. C. Yes, because real income may fall if price increases are proportionately greater than the increases in nominal income. D. No, because real income may rise if price increases are proportionately greater than the increases in nominal income.
The above figure shows Dana's marginal benefit curve for ice cream. If the price of ice cream is $2 per gallon and Dana is allowed to buy only 8 gallons of ice cream, then her consumer surplus on the 8th gallon is
A) $1. B) $2. C) $3. D) $8.
The neoclassical growth theory is based on a subsistence real wage rate
Indicate whether the statement is true or false