Pearson eText Economics of Money, Banking and Financial Markets, The, Business School Edition -- Instant Access (Pearson+)
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Chapter 18, Problem 1Q
To determine

Type of defensive open market operations will the manager undertake if it is difficult for him to present checks for payment and so raising the float if he hears that a snowstorm is about to strike the city.

Concept Introduction:

Open market operations: It is a financial operation which includes buying and selling of securities in the open market.

Float: When Fed clears checks for the banks (from one bank to another), then the bank in which the amount is credited experiences a temporary increase in the total reserves in the banking system (and hence the monetary base) occurring from Fed’s check clearing process is called float.

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