An article in the Wall Street Journal notes that the Fed sets the lower bound, or a
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An article in the Wall Street Journal notes that the Fed sets “the lower bound, or a floor under shortterm rates, with the interest rate it pays institutions like money-market funds on … reverse repurchase agreements.”
a. What is a reverse repurchase agreement?
b. Why would the interest rate the Fed pays on reverse repurchase agreements set a floor under short-term interest rates?
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Money, Banking, and the Financial System
ISBN: 978-0134524061
3rd edition
Authors: R. Glenn Hubbard, Anthony Patrick O'Brien
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