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Viktor [21]
3 years ago
12

Suppose that on any given day the prevailing equilibrium federal funds rate is below the Federal Reserve's federal funds target

rate. If the Federal Reserves wishes for the federal funds rate to be permanently at the target level, then the appropriate policy for the Federal Reserve is to take a defensive open market purchase, everything else held constant. True False
Business
1 answer:
alex41 [277]3 years ago
6 0

The statement which states that If the Federal Reserve's wishes for the <em>federal funds rate</em> to be permanently at the target level, then the <em>appropriate policy</em> for the Federal Reserve is to take a defensive open market purchase, is TRUE.

Based on the given question, we can see that an open market operation refers to the way the federal government makes the federal funds rate to change buy making the loans more easily obtainable.

With this in mind, if they wish for the federal funds rate to be <em>permanently </em>at the target level, then they would have to take a defensive position by increasing the reserves through buying of securities so that <em>economic activity</em> would be stabilised.

Read more about open market operations here:

brainly.com/question/14256204

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