Repurchase Agreements Are Purchased by the Fed to _________ the Aggregate

question 29

Multiple Choice

Repurchase agreements are purchased by the Fed to _________ the aggregate level of bank funds.

• A)temporarily decrease
• B)permanently increase
• C)permanently decrease
• D)temporarily increase

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Definitions:

Expected Market Rate

The average rate of return anticipated by market participants, based on forecasts and historical trends.

Expected Rate of Return

The anticipated amount of profit or loss an investment generates, expressed as a percentage of the initial investment amount.

Covariance

A measure of the degree to which returns on two risky assets move in tandem. A positive covariance means that asset returns move together. A negative covariance means they vary inversely.