Question
Suppose a primary dealer has an adequate reserve balance and enough cash on hand for issuing loans to customers. Select the action the primary dealer could take with the Federal Reserve as its next step to improve on its situation.(1 point)
Responses
The primary dealer could agree to a repurchase agreement with the Federal Reserve so that the primary dealer has an increased supply of reserves.
The primary dealer could agree to a repurchase agreement with the Federal Reserve so that the primary dealer has an increased supply of reserves.
The primary dealer could agree to a reverse repurchase agreement with the Federal Reserve so it can sell the reverse repurchase agreement to the Federal Reserve at a higher price.
The primary dealer could agree to a reverse repurchase agreement with the Federal Reserve so it can sell the reverse repurchase agreement to the Federal Reserve at a higher price.
The primary dealer could engage in open market operations by selling treasuries and mortgage-backed securities to the Federal Reserve to increase the amount of cash the primary dealer has on hand.
The primary dealer could engage in open market operations by selling treasuries and mortgage-backed securities to the Federal Reserve to increase the amount of cash the primary dealer has on hand.
The primary dealer could request for additional loans from other financial institutions on the overnight and short-term lending market.
The correct response is:
The primary dealer could agree to a repurchase agreement with the Federal Reserve so that the primary dealer has an increased supply of reserves.