The fact that the Fed is willing to pay interest on reserves gives the Fed another mechanism for affecting the money supply and the amount of reserves that banks hold.How might a very low interest rate paid on reserves increase the money supply? (Hint: Consider the possible uses of excess reserves.)

Question

Quizplus · Accepted Answer

The Answer of The fact that the Fed is willing to pay interest on reserves gives the Fed another mechanism for affecting the money supply and the amount of reserves that banks hold.How might a very low interest rate paid on reserves increase the money supply? (Hint: Consider the possible uses of excess reserves.)

The Fact That the Fed Is Willing to Pay Interest