By Using Open Market Operations, the Federal Reserve

question 24

Multiple Choice

By using open market operations, the Federal Reserve

• A) adjusts the supply of reserves to keep the federal funds interest rate equal to its target.
• B) adjusts the supply and demand of reserves to keep the federal funds interest rate equal to its target.
• C) adjusts the demand of reserves to keep bank rates in line with the federal funds rate target.
• D) controls banks' demand for reserves, thereby keeping the federal funds rate equal to its target.
• E) None of the above answers is correct.

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Definitions:

Dishonor

In financial contexts, the refusal or inability of a party to pay a debt when due or to accept a bill of exchange when presented.

Material Addition

An amendment or addition to a contract that considerably changes the terms or obligations originally agreed upon.

UCC

Uniform Commercial Code, a comprehensive set of laws governing commercial transactions in the United States.

Endorsement

A signature or statement of support for a policy, idea, or candidate, or in the context of financial instruments, the act of signing over rights to another party.