In the market for reserves,when the federal funds interest rate is below the discount rate,the supply curve of reserves is
A)vertical.
B)horizontal.
C)positively sloped.
D)negatively sloped.

Question

Quizplus · Accepted Answer

When the federal funds rate is below the discount rate, banks prefer borrowing from each other rather than from the Federal Reserve, making the supply of reserves inelastic, hence the supply curve is vertical.

In the Market for Reserves,when the Federal Funds Interest Rate