If the Fed increases the quantity of reserves, a new equilibrium is reached by a
A) rightward shift of the demand for reserves curve.
B) movement down the demand for reserves curve.
C) leftward shift of the demand for reserves curve.
D) movement up the demand for reserves curve.

Question

Quizplus · Accepted Answer

When the Fed increases the quantity of reserves, banks have more reserves than they desire at the current federal funds rate, leading to a movement down along the demand for reserves curve as banks lend out the excess reserves, causing the federal funds rate to decrease.

If the Fed Increases the Quantity of Reserves, a New