Which of the statements is accurate regarding the benefits of the Federal Reserve issuing repurchase agreements (repos) and reverse repurchase agreements (reverse repos).(1 point)

Question

Which of the statements is accurate regarding the benefits of the Federal Reserve issuing repurchase agreements (repos) and reverse repurchase agreements (reverse repos).(1 point)
Responses

Banks can sell repos to other financial institutions for increased liquidity. Banks can buy reverse repos from other financial institutions at a discount.
Banks can sell repos to other financial institutions for increased liquidity. Banks can buy reverse repos from other financial institutions at a discount.

Banks can buy repos from other financial institutions at a discount. Banks can sell reverse repos to other financial institutions for increased liquidity.
Banks can buy repos from other financial institutions at a discount. Banks can sell reverse repos to other financial institutions for increased liquidity.

Banks can sell repos back to the Federal Reserve at a higher price. Reserve repos result in a temporary increase of a bank's reserves and maintain liquidity in the banking system.
Banks can sell repos back to the Federal Reserve at a higher price. Reserve repos result in a temporary increase of a bank's reserves and maintain liquidity in the banking system.

Repos result in a temporary increase in a bank's reserves and maintain liquidity in the banking system. Banks can sell reverse repos back to the Federal Reserve at a higher price in a short period of time.

GPT-4o mini · Answer

The most accurate statement regarding the benefits of the Federal Reserve issuing repurchase agreements (repos) and reverse repurchase agreements (reverse repos) is:

Repos result in a temporary increase in a bank's reserves and maintain liquidity in the banking system. Banks can sell reverse repos back to the Federal Reserve at a higher price in a short period of time.

This statement captures the essence of how repos and reverse repos function in the context of liquidity management in the banking system, although typically, reverse repos are not sold back to the Federal Reserve but rather are repurchased at a higher price by the Federal Reserve.