The reserve demand schedule is drawn on a graph that has the quantity of reserves on the horizontal axis and
A)the price level is on the vertical axis.
B)the federal funds rate is on the vertical axis.
C)the price of bonds is on the vertical axis.
D)income is on the vertical axis.

Question

Quizplus · Accepted Answer

The reserve demand schedule shows the amount of reserves that banks desire to hold at different interest rates, specifically the federal funds rate. Therefore, the federal funds rate should be on the vertical axis of the graph. The other options (price level, price of bonds, income) are not directly related to the reserve demand schedule.

The Reserve Demand Schedule Is Drawn on a Graph That