Which of the following methods for influencing the federal funds rate was first approved by Congress for use by the Federal Reserve during the 2007−2009 recession?
A) Changing the quantity of reserves supplied
B) Changing the reserve requirement
C) Changing the interest rate paid on reserves
D) None of the above

Question

Quizplus · Accepted Answer

The method that was first approved by Congress for use by the Federal Reserve during the 2007-2009 recession was changing the interest rate paid on reserves. This was done to encourage banks to keep excess reserves with the Federal Reserve rather than lending them out, which helped to reduce the supply of funds in the market and increase the federal funds rate.

Which of the Following Methods for Influencing the Federal Funds