The Fed Began Paying Interest on Reserves in October 2008

question 162

Short Answer

The Fed began paying interest on reserves in October 2008. Holding all else constant, what effect would this have on the money supply?

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Definitions:

Physical Capital

Tangible assets used in the production of goods and services, such as machinery, buildings, and infrastructure.

Man-Made Resources

Resources created by humans through processing or altering natural materials, which are used to produce goods and services.

Production Process

The method and sequence of operations involved in the production of a good or service.

Demand for Products

The total amount of a product or service that consumers are willing and able to purchase at various prices during a specified period.