Q2. Using the supply and demand analysis of the market for reserves, indicate what happens to the federal funds rate, borrowed reserves, and non-borrowed reserves, holding everything else constant, under the following situations. Analyze the results when the initial equilibrium arises in the following three scenarios: 1) supply curve intersects demand curve on the demand curve's downward slope part, 2) supply curve intersects demand curve on the demand curve's horizontal part, and 3) demand curve intersects supply curve on the supply curve's horizontal part.

1. (3pts.) The Fed runs open market purchase.

2. (3pts.) The Fed increases the required reserve ratio.

3. (4pts.) Banks expect an unusual increase in withdrawals from checking deposits in the future.

Q2. Using the supply and demand analysis of the market for reserves, indicate what happens to the federal funds rate, borrowed reserves, and non-borrowed reserves, holding everything else constant, under the following situations. Analyze the results when the initial equilibrium arises in the following three scenarios: 1) supply curve intersects demand curve on the demand curve's downward slope part, 2) supply curve intersects demand curve on the demand curve's horizontal part, and 3) demand curve intersects supply curve on the supply curve's horizontal part. 1. (3pts.) The Fed runs open market purchase. Scenario Federal funds rate Borrowed reserve Non-borrowed reserve 1 2 3 2. (3pts.) The Fed increases the required reserve ratio. Federal funds rate Borrowed reserve Non-borrowed reserve Scenario 1 2 3 3. (4pts.) Banks expect an unusual increase in withdrawals from checking deposits in the future. Scenario Federal funds rate Borrowed reserve Non-borrowed reserve 1 2 3