If the Fed paid a higher interest rate to banks on their reserves at the Fed, excess reserves in the banking system would tend to fall.

Name: If the Fed paid a higher interest rate to banks on their reserves at the Fed, excess reserves in the banking system would tend to fall.
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If the Fed paid a higher interest rate on reserves, it would incentivize banks to hold onto excess reserves rather than loan them out, leading to an increase in excess reserves rather than a decrease.

If the Fed Paid a Higher Interest Rate to Banks