One Outcome That Would Result If the Fed Paid Interest

question 6

Multiple Choice

One outcome that would result if the Fed paid interest on reserves would be:

• A)Banks would hold less excess reserves
• B)The federal government's deficit would be larger (or surplus smaller)
• C)Banks would no longer hold excess reserves
• D)The target federal funds rate would have to be fixed at a constant rate

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Definitions:

Sadism

The tendency to derive pleasure, especially sexual gratification, from inflicting pain, suffering, or humiliation on others.

Cognitive-Behavioral

A psychotherapeutic approach that treats problems and boosts happiness by modifying dysfunctional emotions, behaviors, and thoughts.

Inflicting Pain

The act of causing physical or emotional suffering to others.

Alexis De Tocqueville

A 19th-century French political thinker and historian best known for his works analyzing democracy in America and the social impacts of political freedom.