If the demand for reserves is unchanged, an increase in the quantity of reserves will

Question

Quizplus · Accepted Answer

According to the law of supply and demand, an increase in the quantity of reserves should lower the federal funds rate if the demand for reserves remains unchanged. This is because there are now more reserves available, making it easier for banks to lend money to each other, which decreases the interest rate they charge each other (i.e. the federal funds rate).

If the Demand for Reserves Is Unchanged, an Increase in the Quantity