One of the proposals to reform monetary policy has been to have the central bank pay interest
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One of the proposals to reform monetary policy has been to have the central bank pay interest on reserves held at the bank.
a. What effect would that proposal have on excess reserves?
b. Would banks generally favor or oppose this proposal? Why?
c. Would central banks generally favor or oppose this proposal? Why?
d. What effect would this proposal probably have on interest rates paid by banks? LO3
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