If the Reserve Bank Uses Open Market Operations to Offset

question 35

Multiple Choice

If the Reserve Bank uses open market operations to offset a recession, it ________ government securities in order to ________ the cash rate.

• A) sells; lower
• B) buys; lower
• C) buys; not change
• D) sells; raise
• E) buys; raise

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Definitions:

Debt Securities

Financial instruments representing money borrowed that must be repaid, such as bonds or notes.

Bonds

Financial instruments representing a loan made by an investor to a borrower, typically corporations or governmental entities, which pays back with interest.

Corporation

A legal entity recognized by law as separate from its owners, with its own rights, responsibilities, and liabilities.

Legal Entities

Organizations or structures that have legal rights and obligations, including the capacity to enter into contracts and sue or be sued.