What is Interest on Reserve Balances? (Choose an answer from the list below; only one is correct.)

Reference: Federal Reserve Education - Monetary PolicyLinks to an external site. (or the week 2 reading on the Federal Reserve)

Group of answer choices

The interest income that banks earn on securities (such as treasury bonds).

The interest income that banks earn on loan loss reserves.

The Federal Reserve pays interest on funds that banks deposit in their "reserve balance accounts"; enabling banks to earn interest income on any funds they choose to deposit at the Fed.

The interest payments that banks make on short-term loans.