A.) In the market for reserves, suppose the initial equilibrium level of the federal funds rate is equal to the interest rate paid on excess reserves, what happens to the federal funds rate when there is an open market purchase of government securities? Use a graph of the market for reserves to illustrate the impact.

B.) If the Fed has an interest-rate target, why will an increase in the demand for reserves lead to a rise in the money supply? Use a graph of the market for reserves to explain.