QUESTION 21 In the market for reserves, the federal funds rate is equal to 3%. the discount rate is also 3%, and the interest rate paid on excess reserves is equal to 1%, an open market sale the supply of reserves causing the federal funds rate to everything else hold constant decreases remain unchanged increases, decrease decreases, decrease increases, increase O decreases increase QUESTION 22 Other things being equal, as expected inflation rate decreases, how does interest rates change? Interest rates increase because a decrease in the expected inflation rate shifts the demand curve for bonds to the left and the supply curve for bonds to the right. lowering the bond prices while raising the interest rates Interest rates decrease because a decrease in the expected inflation rate this the demand curve for bonds to the right and the supply curve for bonds to the left, lowering the bond prices and the interest rates. Interest rates increase because a decrease in the expected inflation rate shifts the demand curve for bonds to the right and the supply curve for bonds to the right raising the bond prices and the interest rates Interest rates decrease because a decrease in the expected inflation rate shits the demand curve for bonds to the left and the supply curve for bonds to the left, raising the bond prices while lowering the interest rates Interest rates decrease because a decrease in the expected inflation rate shifts the demand curve for bonds to the right and the supply curve for bonds to the left, raising the bond prices while lowering the interest rates