Raising the interest paid on reserves has the effect of making it
A) more costly for banks to hold excess reserves.
B) less costly for banks to hold excess reserves.
C) more attractive for banks to lend out their excess reserves.
D) less attractive for banks to hold required reserves.

Question

Quizplus · Accepted Answer

Raising the interest paid on reserves makes it less costly for banks to hold excess reserves because they earn more interest on these reserves, providing an incentive to keep funds with the central bank rather than lending them out.

Raising the Interest Paid on Reserves Has the Effect of Making