During the economic crisis of 2008, the Fed acquired the authority to
A) pay interest to commercial banks on their reserves.
B) determine the size of the budget deficit or surplus of the Federal Government.
C) require the Treasury to print and issue additional currency.
D) purchase gold in sufficient amounts to back the U.S. dollar.

Question

Quizplus · Accepted Answer

During the economic crisis of 2008, the Fed acquired the authority to pay interest on the reserve balances that banks hold at the Fed. This was done to encourage banks to keep their reserves at the Fed instead of lending them out, which would help to stabilize the financial system. The other choices (B, C, D) are not accurate descriptions of actions taken by the Fed during the crisis.

During the Economic Crisis of 2008, the Fed Acquired the Authority