In the market for reserves,if the federal funds rate is between the discount rate and the interest rate paid on excess reserves,a ________ in the reserve requirement increases the demand for reserves,________ the federal funds interest rate,everything else held constant.

Question

Quizplus · Accepted Answer

A rise in the reserve requirement increases the demand for reserves as banks need to hold more reserves to meet the new requirement. This increased demand for reserves, with everything else held constant, puts upward pressure on the federal funds interest rate, thereby raising it.

In the Market for Reserves,if the Federal Funds Rate Is