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Why does the Fed pay interest to banks?
It is interest on money held in reserve.
It is interest on credit available to the Fed.
It is interest on loans taken by the Fed.
It is interest on government investments.
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It is interest on money held in reserve.
The Fed pays interest on banks' reserve balances (interest on required and excess reserves) to give banks a return on deposits at the Fed and to help control short‑term interest rates. The other choices are incorrect.
The Fed pays interest on banks' reserve balances (interest on required and excess reserves) to give banks a return on deposits at the Fed and to help control short‑term interest rates. The other choices are incorrect.
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