Question

The Federal Reserve will engage in an outright purchase if it wants to ________ reserves ________ in the banking system. A. decrease; temporarily B. decrease; permanently C. increase; permanently D. increase; temporarily

Answer 1

The Federal Reserve will engage in an outright purchase if it wants to increase reserves permanently in the banking system.

Option C

Explanation:

The Federal Reserve will make a full purchase if it wants to permanently increase its reserves in the banking system.

The Federal Reserve is the United States of America's monetary system. The Federal Reserve Act was enacted on 23 December 1913, following a series of financial turmoil that contributed to the desire to dominate the financial system directly in order to reduce the banking crisis.

The US Congress has identified three key monetary policy priorities under the Federal Reserve Act, which are to increase employment, stable markets and reduce the rate of long-term interest.