Everything else remaining unchanged,if the demand curve for reserves shifts to the left and the value of borrowed reserves is zero,________.
A) there will be an increase in both the federal funds rate and the quantity of reserves
B) there will be a decrease in both the federal funds rate and the quantity of reserves
C) there will be a decrease in the federal funds rate but no change in the quantity of reserves
D) there will be an increase in the federal funds rate but no change in the quantity of reserves

Question

Quizplus · Accepted Answer

When the demand curve for reserves shifts to the left and borrowed reserves are zero, the federal funds rate decreases due to lower demand, but the quantity of reserves remains unchanged as it is determined by the central bank's supply policy.

Everything Else Remaining Unchanged,if the Demand Curve for Reserves Shifts