AP Macro 4.6 - Monetary Policy: Ample Reserves
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7 Terms
IORB
-Interest On Reserve Balances
-the interest rate banks earn from the FED on the funds they deposit into their reserve bank accounts (risk-free)
-steers the FFR
reservation rate
the lowest rate that banks are likely willing to accept for lending out their funds
arbitrage
simultaneous purchase and sale of fund (or goods) in order to profit from a difference in price
federal funds market
-market for bank reserves
-where banks loan other banks money to earn the FFR
ONRRP
-Overnight Reverse Repurchase
-acts like the reservation rate for a large number of financial institutions that don’t qualify for IROB
-sets a floor on the FFR
what are the two concepts that IROB relies on?
Reservation rate and Arbitrage
Discount Rate
-a rate that serves as a ceiling for FFR
Note 
Flashcards (40)