Which of the following is true?

Question

Quizplus · Accepted Answer

A) When the Fed pays a higher interest rate on reserves, banks are incentivized to hold onto their reserves rather than lending them out, which can reduce the money supply. B) If banks are disincentivized to hold excess reserves due to lower interest rates on reserves, they are more likely to lend out their reserves, which can increase the money supply. However, if banks never wanted to hold excess reserves in the first place, changing the interest rate on reserves wouldn't have an impact. C) Holding excess reserves means that banks are not lending out as much as they potentially could, which reduces the actual money multiplier effect compared to its theoretical maximum.

Which of the Following Is True