In 2016, the federal funds rate was 0.15 percent, which means that the opportunity cost of holding reserves was ________ and consequently banks had a ________ incentive to economize on reserves.

Question

Quizplus · Accepted Answer

When the federal funds rate is low, the opportunity cost of holding reserves is also low, meaning banks have less incentive to economize on reserves because they are not foregoing a significant return by holding onto them.

In 2016, the Federal Funds Rate Was 0