In prosperous times, commercial banks are likely to hold very small amounts of excess reserves because:
A. the Fed forces commercial banks to increase the money supply during economic
expansions.
B. it is very costly to transfer funds between commercial banks and the central banks.
C. Federal Reserve Banks pay lower rates of interest on bank reserves than could be earned
by the commercial banks loaning out the reserves.
D. Federal Reserve Banks want to minimize their interest payments on such deposits.
C. Federal Reserve Banks pay lower rates of interest on bank reserves than could be earned
by the commercial banks loaning out the reserves
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A sale of foreign assets by a central bank has the same effect on the monetary base as
A) a decrease in the discount rate. B) a decrease in the required reserve ratio. C) an open market sale of government bonds. D) an open market purchase of government bonds.
Over the past several years and until recently, the United States has had lower unemployment rates than most European countries.
Answer the following statement true (T) or false (F)