Good idea for the fed to pay interest on bank reserves

Assignment Help Business Economics

Reference no: EM131089542

Banks today have more than $2 trillion in excess reserves, i.e., reserves beyond what they are required to keep. (Required reserves are less than $0.2 trillion, by the way.) Before 2008, banks kept almost no excess reserves. a. There are two reasons – one big, one not as big – why excess reserves shot up so fast. Name them and explain. b. Prior to late 2008, the Fed did not pay interest on banks’ reserve accounts at the Fed. Now the Fed does. What is the Fed’s rationale for paying interest on bank reserves? c. Why, according to some people, is it not a good idea for the Fed to pay interest on bank reserves?

Reference no: EM131089542

Questions Cloud

Consumers distributed uniformly around the circle : Suppose there are 8 firms located equidistantly around a circle whose circumference is equal to 1. There are 400 consumers distributed uniformly around the circle. Each consumer gets utility U = 3.5 from buying a unit of the good from a firm which se..

Which government is right for you : "Which government is right for you?" Perhaps a better way of saying it is this: would you like a caretaker type of government who looks out for you or would you like a hands-off type of government that basically let's you make your own decisions? For..

Designed to reduce moral hazard created by deposit insurance : Which of the following are regulations that are designed to reduce the moral hazard created by deposit insurance?

What is the present value of the growing perpetuity : What is the present value of a perpetual stream of cash flows that pays $80,000 at the end of one year and grows at a rate of 7% indefinitely?

Good idea for the fed to pay interest on bank reserves : Banks today have more than $2 trillion in excess reserves, i.e., reserves beyond what they are required to keep. (Required reserves are less than $0.2 trillion, by the way.) Before 2008, banks kept almost no excess reserves. Why, according to some pe..

How much will sarah have to invest today : How much will Sarah have to invest today? If she earned an annual return of 18%, how soon could she then retire?

What is the proportion for smoker for men : In a survey to identify of risk factors for heart disease among men and women were asked about if they ever smoke. Of the 430 men, 116 said they smoke. Of the 380 women, 73 said they smoke. What is the proportion for smoker for men

Write an essay examining a cultural conflict : What conflict have you chosen and what are your initial impressions of the economic, cultural, political, and territorial causes of the conflict?

What most significant problem with matrix project structure : What is the term used to describe the longest path time through a CPM network? In using modern project management, what does the "rule of urgency" NOT create?

User Account

All Pages