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Social Studies, 16.02.2022 08:20 kevinsosdik

Financial institutions weigh the choice between earning interest on excess reserves from the Fed with the option to earn interest by loaning excess reserves to customers. If the Federal Reserve changes the interest rate on excess reserves, it changes the incentive financial institutions have to keep their reserves with the Fed, increasing or decreasing the money supply. What is the opportunity cost for banks when they hold onto their excess reserves? a. The interest they could have earned by lending that money to customers
b. The interest they could have earned if the Fed raised the discount rate
c. None of the above.
d. The taxes they don't have to pay on the extra income they earned

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