Instead of outright sale of securities, the Central Bank may sell securities through an agreement which has a specification about the date and price at which it will be repurchased. This type of agreement is called _____. The  rate at which money is withdrawn in this manner is called ______.

reverse repurchase agreement, reverse repo rate.

The correct answer is Option (4) → reverse repurchase agreement, reverse repo rate.

When the central bank buys a security, this agreement of purchase also has specification about date and price of resale of this security. This type of agreement is called a repurchase agreement or repo. The interest rate at which the money is lent in this way is called the repo rate.

Similarly, instead of outright sale of securities the central bank may sell the securities through an agreement which has a specification about the date and price at which it will be repurchased. This type of agreement is called a reverse repurchase agreement or reverse repo. The rate at which the money is withdrawn in this manner is called the reverse repo rate.