What type of agreement involves the Fed temporarily purchasing securities from dealers?

The correct answer is repurchase agreements. This type of agreement is a financial transaction where the Federal Reserve temporarily buys securities from dealers with the intention of selling them back at a later date, usually within a few days. This process helps inject liquidity into the financial system, enabling banks and other financial institutions to meet short-term funding needs.

The mechanics of a repurchase agreement allow the Federal Reserve to manage the money supply more effectively. By purchasing securities, the Fed increases the reserves in the banking system, which can potentially lower interest rates. When the Fed sells the securities back to the dealers, the liquidity is withdrawn from the system, which can help curb inflation if necessary.

The other options do not accurately describe this kind of transaction. For example, federal agreements and investment agreements are not specific types of financial transactions recognized in this context, while securities arrangements does not pinpoint the temporary nature and the buyback commitment involved in repurchase agreements. The essence of repurchase agreements lies in their role in monetary policy, making them a vital tool for central banking operations.