Within the market for reserves, an increase in the quantity of reserves results in a

Question

Quizplus · Accepted Answer

An increase in the quantity of reserves in the market for reserves increases the supply of reserves, leading to a surplus. This surplus leads to a decrease in the equilibrium federal funds rate, as banks become willing to lend reserves at a lower interest rate in order to get rid of the surplus. Therefore, the correct answer is C.

Within the Market for Reserves, an Increase in the Quantity