Question 16: Under the maturity extension program better known as "Operation Twist' between September 2011 and the end of 2012 the Federal Reserve purchased about $700 billion of longer-term Treasury securities and sold or allowed to run off an equal amount of shorter-term Treasury securities. All else being equal, we would expect: a. The effect of this policy to be dollar neutral as the Fed is buying long term bonds (which increase the supply of dollars) and selling short term bonds (which decreases the amount of dollars by the same amount). b. Put downward pressure on prices of financial assets (e.g. corporate bonds, mortgage- backed securities) that investors consider close substitutes for longer-term Treasury securities. Put downward pressure on longer-term bond prices and therefore raised their yields. The effect of this policy on the dollar to be different from quantitative easing that leads to a stronger US dollar as more dollars are owing into the economy. e. All of the answers. PP