Question
1. When was the Federal Reserve created and why was it needed in the first place? 2. Explain Interest on Reserve Balances (IORB) in my
1. When was the Federal Reserve created and why was it needed in the first place?
2. Explain Interest on Reserve Balances (IORB) in my own words.
3. Suppose the Federal Funds rate (FFR) is 3%, while the IORB rate is 3.5%. Is there an arbitrage opportunity for the bank to make money from this difference? What should a bank do to maximize its return?
4. How will this action influence the Federal Funds rate (FFR)?
5. Explain how the Overnight Reverse Repurchase Facility rate (ON RRP) sets a floor on the Federal Funds rate (FFR)?
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Essentials of Economics
Authors: Bradley Schiller, Karen Gebhardt
10th edition
125923570X, 978-1259235702
