An increase in reserve requirements

A.

leaves nonborrowed reserves unchanged and increases the federal funds rate.leaves nonborrowed reserves unchanged and increases the federal funds rate.

B.

increases nonborrowed reserves and increases the federal funds rate.

C.

decreases nonborrowed reserves and decreases the federal funds rate.

D.

leaves nonborrowed reserves unchanged and decreases the federal funds rate.leaves nonborrowed reserves unchanged and decreases the federal funds rate.

If the Fed increases

i Subscript orior

enough, such that it will raise the intersection point with the vertical portion of reservesupply, then the equilibrium fed funds rate will

3

Suppose the demand for reserves is initially R in the figure on the right. (Do not round your answers.) Nonborrowed reserves-S billion Borrowed reserves- billion. The federal funds rate-D% The discount rate = The interest rate on reserves 1% eral Funds e, iff D% 6.5 RS $40 bil $41 bil Quantity o Reservs. R