Recall the Application About the Fed Increasing Bank Reserves During

question 160

Multiple Choice

Recall the Application about the Fed increasing bank reserves during the financial crisis in 2008 to answer the following question(s) . During the height of the financial crisis in September 2008, The Fed injected large amounts of reserves into banks, and in the next month, they started paying interest to banks on these reserves. Prior to this time, banks earned no interest on either required or excess reserves.
-According to the Application, the Fed started paying interest to banks on reserves. Since this change has occurred,

• A) total reserves now far exceed required reserves.
• B) total reserves are finally equal to required reserves.
• C) all total reserves are now excess reserves.
• D) required reserves now exceed total reserves.

---

Definitions:

Monthly

Pertains to something occurring, produced, or settled every month.

Annual Discount Rate

The rate used to discount future cash flows to the present value, reflecting the time value of money and investment risk.

Receiving Annually

Refers to receiving a particular sum or type of benefit every year.

Perpetually

Continuing forever or for an indefinite period without anticipated termination.