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 ________ the demand for reserves,lowering the federal funds interest rate,everything else held constant.

Question

Quizplus · Accepted Answer

If the federal funds rate is between the discount rate and the interest rate paid on excess reserves, a reduction in reserve requirements will increase the supply of reserves, leading to a decrease in the demand for reserves and a lower federal funds rate. Therefore, the best choice is (D) decline; decreases.

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