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g If the Fed reduces the interest paid on banks' reserves, it is trying to make banks hold Multiple Choice less excess reserves. more required reserves. less required reserves. more excess reserves.

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Tundexi

If the Federal Reserve decreases the interest paid on banks' reserves, then, it means it is trying to make banks hold less required reserves.

A decrease in interest paid on banks' reserves relates with charging a lower interest rate that ensure that bank keeps borrowing.

  • So if Fed wants to give banks more reserves, it will reduce the interest rate it charges, thus, inducing the banks to borrow more.

In conclusion, the Option C is correct because If the Federal Reserve decreases the interest paid on banks' reserves, then, it means it is trying to make banks hold less required reserves.

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