Why does the Fed pay interest to banks?

Students were requested to answer a question at academics and to tell what is most important for them to succeed. Of the many results, the one that that stood out was practice. Persons who ordinarily are successful do not become successful by being born. They work hard and dedication their lives to succeeding. This is how you can achieve your goals. beneath are one of the answer and question example that you could definitely use to practice and boost your information and also give you insights that might assist you to maintain your study in school.

Question:

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.​

Answer:

The Fed pays interest to banks because it is the interest on money held in reserve.

What are reserves?

Reserves is the total amount of a bank’s deposit that is not given out as loans and kept with the Fed. The amount of reserves is dependent on the reserve requirement.

The purpose of reserves is for to have money for meet unforeseen situation. it is also a means to control money supply.

From the answer and question examples above, hopefully, they might guide the student solve the question they had been looking for and take note of each thing declared in the answer above. Then will be able to have some sharing in a group discussion and also learning with the classmate somewhere around the topic, so another student also absorb some enlightenment and still keeps up the school learning.

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