Answer to Question #191245 in Macroeconomics for James

Question

QUESTION 1

Prior to 2008, the Federal Reserve did not pay interest on reserves held by banks at the Federal Reserve. Many analysts argued that the requirement to hold reserves placed a tax on banks. How would you measure the tax?

1. discount rate
2. Fed funds rate (FFR)
3. interest rate on excess reserves (IROER)
4. the difference between the fed funds rate (FFR) and the interest rate on reserves (IOR)

QUESTION 2

Which of the following is correct? Select all that apply.

1. The Board of Governors sets the interest rate on reserves.
2. The federal funds market involves very short-term lending between banks.
3. The current target for the fed funds rate is 0.0% to 0.25%.
4. The interest rate on reserves (IOR) is 0.1%.
5. The current discount rate at the Fed is 0.25%.
6. The federal funds market involves lending between federal reserve banks.

Answer 1

Question 1

4:the difference between the fed funds rate (FFR) and the interest rate on reserves (IOR)

Question 2

1. The Board of Governors sets the interest rate on reserves.
2. The federal funds market involves very short-term lending between banks.
3. The current target for the fed funds rate is 0.0% to 0.25%.
4. The interest rate on reserves (IOR) is 0.1%.
5. The current discount rate at the Fed is 0.25%.