If the Federal Reserve began to pay interest on reserves, the deposit multiplier would fall.

Name: If the Federal Reserve began to pay interest on reserves, the deposit multiplier would fall.
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Paying interest on reserves encourages banks to hold more reserves at the Federal Reserve, reducing the amount they lend out. This decreases the deposit multiplier, as there is less creation of new money through the lending process.

If the Federal Reserve Began to Pay Interest on Reserves