Explain dynamic and defensive open market operations. What is the purpose of each type? Describe two situations when defensive open market operations are used. How are defensive open market operations typically conducted?
What will be an ideal response?
Dynamic OMOs are used to permanently change the monetary base and money supply. Defensive operations are used to offset temporary changes in the monetary base and/or money supply. Defensive operations are used to offset float, shifts in Treasury balances into or out of the Fed, and temporary changes in currency. Defensive purchases are typically conducted by using repurchase agreements, while reverse repos or matched sale-purchase transactions are used to conduct defensive open market sales.
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At the equilibrium level of income, the value of consumption is equal to
A) (consumption - savings). B) (income - investment). C) (savings + investment). D) (income + investment).
The above table shows the distribution of wealth and income in Miseria. The Lorenz curve for wealth would
A) intersect the horizontal axis at 100 percent. B) bow outward more to the right than does the Lorenz curve for income. C) lie parallel to the line of equality. D) become flatter as one moves from left to right.