Use the following to answer the next 3 questions Starting December 2015, the Fed stopped using the traditional approach for setting the target federal funds rate and adjusting reserves (using open market operations (OMO)) to hit it. Instead, it sets a range within which it wants to see the federal funds rate (ii) fluctuate. The lower bound of the range is determined by the rate that Fed pays on overnight reverse repos (ON RRP). 14. What does an ON RRP agreement involve? a. It involves the Fed selling securities to financial institutions and buying it back the next day b. It involves the Fed buying securities from financial institutions and selling it back the next day c. It involves the Fed buying securities from financial institutions d. It involves the Fed selling securities to financial institutions e. None of the above 15. Why did the Fed abandon the traditional approach of using OMO to change the federal funds rate? a. After the crises, banks' holding of excess reserves was so large that using OMO would disrupt financial markets b. After the crisis the demand for reserves was increasing at a pace faster than the Fed's supply of reserves c. Financial institutions that can transact in the federal funds market but do not receive the ioer for holding reserves with the Fed had an incentive to lend at a rate below iOER d. Financial institutions that can transact in the federal funds market but do not receive the ioer for holding reserves with the Fed had an incentive to lend at a rate lower than the reverse repo rate e. Both (a) and (c) 16. When the Federal government buys Treasury securities it increases money supply because the purchase increases the monetary base a. True b. False 17. Is the statement: The monetary base always rises when government runs a deficit." a) True b) False