Multiple Choice
Recall Application 1, "Avoiding a Liquidity Trap," to answer the following questions:
-What is the reason why the Fed started paying interest on bank reserves in 2008?
A) Paying interest on bank reserves increases money supply.
B) Paying interest on bank reserves places a floor on market interest rates.
C) Paying interest on bank reserves lowers the reserve requirement.
D) Paying interest on bank reserves increases bank profitability.
Correct Answer:
Verified
Correct Answer:
Verified
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