Multiple choice question.
It reduces the money supply and puts upward pressure only on money market interest rates.
It reduces the money supply and puts upward pressure on all interest rates.
It increases the money supply and puts downward pressure on all interest rates.
It increases the money supply and puts downward pressure only on money market interest rates.
1 answer
When the Federal Reserve (Fed) raises the Interest on Required Balances (IORB) rate, the correct answer is:
It reduces the money supply and puts upward pressure on all interest rates.
Raising the IORB rate incentivizes banks to hold more reserves rather than lend them out, which can reduce the overall money supply and lead to higher interest rates in the economy.
