Question

The Federal Reserve implemented this monetary policy tool in 2008 that is "intended to eliminate effectively the implicit tax that reserve requirements used to impose on depository institutions."
A) Discount Rate
B) Reserve Requirement
C) Open market operations
D) Interest rate on required reserves

Answer 1

Answer:

D

Explanation:

- I got this exact question on a econ usatestprep test.

Answer 2

Answer:

D). Interest rate on required reserves.

Explanation:

Monetary policy is defined as the policy employed by the central bank in order to stabilize the economy and bring it to equilibrium by either controlling the supply of money in the market or by altering the interest rates.

As per the question, federal reserve implemented the monetary policy that 'intends to eliminate....institutions' would be determining the 'interest rate on required reserves'. This determination of interest rates by the central bank assists to control the interest rates on required or excess reserves(as a part of the monetary policy) to maintain the equilibrium of the economy. Thus, option D is the correct answer.