Everything else held constant,the vertical section of the supply curve of reserves is shortened when the
A)discount rate increases.
B)discount rate decreases.
C)federal funds rate rises.
D)federal funds rate falls.

Question

Quizplus · Accepted Answer

The vertical section of the supply curve of reserves is shortened when the discount rate decreases because it becomes cheaper for banks to borrow from the Federal Reserve, making them less reliant on reserves.

Everything Else Held Constant,the Vertical Section of the Supply Curve