Explain Dynamic and Defensive Open Market Operations

question 81

Essay

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?

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Definitions:

Flood

An overflow of a large amount of water beyond its normal limits, especially over what is normally dry land.

Insurance

A financial product designed to protect against the risk of financial losses, both big and small, that result from damage to the insured or property, or liability for damage or injury caused to a third party.

Wealth

The abundance of valuable resources, assets, or material possessions an individual or entity controls.

Utility Function

Describes the relationship between the consumption of goods and the resulting level of satisfaction or utility for an individual.