The new monetary policy tool that the Fed began using in 2008 is
A)changing the interest rate paid on reserves.
B)imposing a surcharge on credit cards.
C)putting a tax on all financial transactions.
D)borrowing from China.

Question

Quizplus · Accepted Answer

The new monetary policy tool that the Fed began using in 2008 is changing the interest rate paid on reserves. This is known as the interest on excess reserves (IOER) policy, which involves the Fed paying interest on the excess reserves that banks hold with the Fed. By adjusting the interest rate on reserves, the Fed can influence the amount of money that banks lend out, and therefore, the overall level of economic activity in the economy.

The New Monetary Policy Tool That the Fed Began Using