Which of the following is most likely to occur if the quantity demanded of reserves is greater than the quantity supplied of reserves?
A)The fed funds rate will fall.
B)The fed funds rate will rise.
C)Discount borrowing will decrease.
D)Both the fed funds rate will rise and discount borrowing will decrease.

Question

Quizplus · Accepted Answer

When the quantity demanded of reserves exceeds the quantity supplied, banks will compete more aggressively for available reserves, driving up the fed funds rate.

Which of the Following Is Most Likely to Occur If