Recall Application 1, "Avoiding a Liquidity Trap," to Answer the Following

question 24

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.

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Definitions:

NADH

Nicotinamide adenine dinucleotide (NADH) is a coenzyme found in all living cells, involved in redox reactions and energy production through cellular respiration.

Glycolysis

The metabolic pathway that breaks down glucose into pyruvate, releasing energy and pyruvic acid, occurring in the cytoplasm of cells.

Niacin

Also known as Vitamin B3, it is essential for converting food into energy, maintaining skin health, and supporting the nervous and digestive systems.

Pellagra

A vitamin deficiency disease most commonly caused by a lack of niacin (vitamin B3) in the diet, leading to dermatitis, diarrhea, dementia, and even death if untreated.