In order to induce private banks to maintain substantial reserve deposits with the Federal Reserve banks,...
In order to induce private banks to maintain substantial reserve deposits with the Federal Reserve banks, since 2008 the Fed has
A.paid banks an interest rate that is lower than the federal funds rate.
B.paid banks an interest rate that is equal to the federal funds rate.
C.raised the legal reserve ratio that the banks have to maintain.
D.paid banks an interest rate that is higher than the federal funds rate on their reserves.
Homework Answers
| The Federal reserve will pay the private banks a high interest rate to induce them | ||||||||
| to maintain a substantial reserve deposit with the Federal reserve banks. | ||||||||
| The Federal reserve cannot induce the banks to maintain a substantial reserve deposit | ||||||||
| by asking them to maintain a high legal reserve ratio. To induce the private banks, | ||||||||
| the Federal reserve must pay an interest rate higher then the federal funds rate | ||||||||
| on the reserves held by the private banks with the Federal reserve banks. | ||||||||
| D.paid banks an interest rate that is higher than the federal funds rate on their reserves. | ||||||||
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