An article in the wall street journal noted that the fed sets "the lower bound, or a floor under short-term rates, with the interest rate it pays institutions like money-market funds on reverse repurchase agreements." source: michael s. derby and katy burne, "fed bolsters tool kit for lifting interest rates," wall street journal, december 16, 2015.
a. what is a reverse repurchase agreement?
b. why woudl the interest rate the fed pays on reverse repurchase agreements set a floor under shor-term interest rates?
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An article in the wall street journal noted that the fed sets "the lower bound, or a floor under sho...
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