Which of the following statements is true regarding interest in reserves? a. Since 2000, the Fed fixed interest on reserve at zero. b. Since 2008, interest on reserve is fixed at 2% per month. c. Interest in reserves make reserve requirements unnecessary. d. Interest in reserves make reserve requirements necessary.
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Interest on reserves is the rate at which central banks (like the Federal Reserve in the United States) pay banks for holding their reserves at the central bank. This policy tool influences how much banks choose to keep in reserves versus how much they lend out. Show more…
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