Other things equal,which of the following would increase the federal funds rate?

Question

Quizplus · Accepted Answer

Excess reserves are the reserves held by banks in excess of the required reserve ratio. When there is a decline in excess reserves in the banking system, it means banks have less money to lend in the federal funds market. As a result, the demand for federal funds increases, which leads to an increase in the federal funds rate. A decrease in loan demand in the federal funds market (Option A), a decrease in the reserve ratio (Option B), and Fed purchases of government securities from banks (Option C) would all lead to an increase in the supply of funds in the federal funds market, which would put downward pressure on the federal funds rate.

Other Things Equal,which of the Following Would Increase the Federal