In a speech to the Fed conference in Jackson? Hole, Wyoming mentioned in the cha
ID: 1167216 • Letter: I
Question
In a speech to the Fed conference in Jackson? Hole, Wyoming mentioned in the chapter? opener, Fed Chair Janet Yellen observed that the financial crisis revealed the? Fed's open double quoteinability to control the federal funds rate once reserves were no longer relatively scarce.close double quote She went on to state? that: open double quoteTo address the challenges posed by the financial crisis ...the Federal Reserve significantly expanded its monetary policy toolkit.... Our current toolkit proved effective last December. In an environment of superabundant? reserves, the FOMC raised the effective federal funds rateclose double quote ?Source: Janet L.? Yellen, open double quoteThe Federal? Reserve's Monetary Policy? Toolkit: Past,? Present, and ?Future,close double quote Remarks at open double quoteDesigning Resilient Monetary Policy Frameworks for the Futureclose double quote a symposium sponsored by the Federal Reserve Bank of Kansas? City, Jackson? Hole, Wyoming, August? 26, 2016. What does Yellen mean by saying that open double quotereserves were no longer relatively scarceclose double quote? pick answer below:
A. Reserves are so large that banks can easily borrow reserves from other banks.
B. Reserves are so large that banks have little need to increase the level of their depository accounts.
C. Reserves are so large that banks can easily increase their lending activities.
D. Reserves are so large that banks have little need to borrow reserves from other banks.
Explanation / Answer
Option D. Reserves are so large that banks have little need to borrow reserves from other banks.
Explanation: The financial crisis revealed the need of increases reserved by banks. Now, banks have abundant reserves with the Fed so that they do not need to borrow reserves from other banks.