Consider the market for reserves, and suppose that the supply curve currently intersects the demand curve in the downw
Posted: Thu May 19, 2022 8:07 am
Consider the market for reserves, and suppose that the
supply curve currently intersects the demand curve in
the downward-sloping section of the demand curve. What
happens to the federal funds rate if the Fed increases open
market purchases, and the reserve requirement on banks is
reduced at the same time?
A.
The federal funds rate increases
B.
The effect cannot be determined without additional
information
C.
The federal funds rate does not change
D.
The federal funds rate falls
supply curve currently intersects the demand curve in
the downward-sloping section of the demand curve. What
happens to the federal funds rate if the Fed increases open
market purchases, and the reserve requirement on banks is
reduced at the same time?
A.
The federal funds rate increases
B.
The effect cannot be determined without additional
information
C.
The federal funds rate does not change
D.
The federal funds rate falls