A decrease in Federal Reserve float will
A)increase nonborrowed reserves.
B)increase borrowed reserves.
C)increase the federal funds rate.
D)decrease the federal funds rate.

Question

Quizplus · Accepted Answer

When there is a decrease in Federal Reserve float, it means the amount of funds available to banks from the Federal Reserve is reduced. This leads to an increase in demand for federal funds, thereby causing an increase in the federal funds rate. Therefore, the best choice is C, increase the federal funds rate.

A Decrease in Federal Reserve Float Will