When the Fed Sells a Security to a Financial Firm

question 216

Multiple Choice

When the Fed sells a security to a financial firm and the Fed agrees to buy back the security the next day,the transaction is known as

• A)a repurchase agreement.
• B)a reverse repurchase agreement.
• C)an open market flip-flop.
• D)a federal funds swap.

---

Definitions:

Consumer Surplus

The difference between what consumers are willing to pay for a good or service and what they actually pay.

Producer Surplus

The difference between what producers are willing to accept for a good or service versus what they actually receive, typically illustrated as the area above the supply curve and below the market price.

Price Ceiling

A legally imposed limit on how high a price for a good, service, or commodity can be charged.

Market Supply Curve

A graphical representation that shows the relationship between the price of a good and the total output of the good all suppliers are willing and able to produce, holding other factors constant.