In October 2008,in attempt to avoid high inflationary tendencies which could damage the recovery from the Great Recession the Federal Reserve

Question

Quizplus · Accepted Answer

By paying interest on reserves held by banks at the Federal Reserve, the Fed incentivized banks to hold excess reserves instead of loaning them out, which both helped to prevent inflationary pressures and encouraged banks to be more cautious with their lending. The other options, such as increasing reserve requirements or selling government securities, would have similarly reduced the amount of money in circulation and decreased inflationary pressures, but they would have had more direct and potentially harmful effects on the banking industry and the broader economy. Increasing interest rates charged to banks when borrowing from the FED would have been counterproductive, as it would have incentivized banks to loan out even more money in order to make up for the increased cost of borrowing.

In October 2008,in Attempt to Avoid High Inflationary Tendencies Which