Principles of Macroeconomics / Unit 12 MAC 1123 short lesson, about 20 seconds
Interest on Reserve Balances
Captions available
The idea
The main tool now is the interest rate the central bank pays on reserves banks hold with it. Authorised in 2006, begun in 2008, and consolidated into one rate in 2021.
In practice
Paying interest on reserves changes what holding them costs a bank.
Where people slip
This breaks unit eleven's step three: reserves that pay need not be lent.
Your place on the trail
Every lesson rests on earlier ones and opens later ones. Tap any to jump.
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