Question

The interest rate on reserve balances (iorb) is the fed's newest monetary policy tool. for each of the following situations, indicate whether the fed raised or lowered the (4 items) (drag and drop into the appropriate area below)in 2009, when the unemployment rate was increasing due to the great recession.between 2016 to 2019, when the unemployment rate was below 6%.in 2020, at the onset of the covid-19 2022, as the economy recovered from the covid-19 recession, and the unemployment rate fell below 4%.

For the year 2020, at the onset of the COVID-19 pandemic, what did the Federal Reserve do with the Interest on Reserve Balances (IORB)?
A) Raised IORB
B) Lowered IORB
C) No change in IORB
D) Insufficient information

Answer 1

In 2020, during the COVID-19 pandemic, the Federal Reserve likely lowered the Interest on Reserve Balances (IORB) to stimulate the economy, as indicated by the reduction of the federal funds rate from over 2% to 0.05% in March 2020.

Step-by-step explanation:

The Interest on Reserve Balances (IORB) is a monetary policy tool used by the Federal Reserve to influence the economy. In Episode 9, during the Great Recession of 2008, the Federal Reserve aggressively cut interest rates to nearly 0% by 2009 as the economy was deep in recession.

Similarly, in response to the economic shock of the COVID-19 pandemic in 2020, historical patterns suggest that the Federal Reserve would also lower interest rates to stimulate economic activity. Specifically, from the information given, the federal funds rate was over 2% and was reduced to 0.05% in March 2020, which indicates a significant reduction in IORB as well.