Instrument used by Federal Reserve to smooth money supply and interest rates includes

A. treasury notes

B. repurchase agreements

C. commercial payable notes

D. commercial receivable notes

Answer: Option B

Solution(By Examveda Team)

Instrument used by Federal Reserve to smooth money supply and interest rates includes repurchase agreements. A repurchase agreement (repo) is a form of short-term borrowing for dealers in government securities. In the case of a repo, a dealer sells government securities to investors, usually on an overnight basis, and buys them back the following day.