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The Fed open market operations is used to influence the Fed Funds Rate through changing the supply of reserve balances. For example, if the Fed
The Fed open market operations is used to influence the Fed Funds Rate through changing the supply of reserve balances. For example, if the Fed increases supply of excess reserves, banks have more money to lend and Fed Funds Rate should decrease. Explain how the Fed paying interest on reserve balances can influence the expected effect of open market operations using current conditions.
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