What Is the Difference Between Defensive and Dynamic Open Market

question 29

Essay

What is the difference between defensive and dynamic open market operations?

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Definitions:

Lockbox System

A service provided by banks to companies for the collection of payments from customers, enhancing the speed and security of transactions.

Money Market Securities

Short-term financial instruments, such as Treasury bills and commercial paper, offering liquidity and low risk.

Collection Time

is the average number of days it takes for a business to convert its receivables into cash, reflecting the efficiency of its credit policies and collections.

Average Daily Float

The average daily float refers to the difference between checks written and checks cleared or deposited, highlighting the average amount of unprocessed checks within a certain timeframe.