The experience since 2008 has shown that a decrease in the Fed Funds target rate will not always lead to fewer excess reserves and an increase in bank lending.

Question

Quizplus · Accepted Answer

The experience since 2008, particularly during the financial crisis and its aftermath, showed that despite the Federal Reserve lowering the Fed Funds target rate to near zero, banks still held onto large amounts of excess reserves instead of increasing lending. This was due to a combination of factors including risk aversion, regulatory changes, and weak demand for loans.

The Experience Since 2008 Has Shown That a Decrease in the Fed