true and false questions

money and banking - FIN410

The federal funds rate is determined in the market for reserves. The monetary policy is conducted by the ministry of Finance As the difference between the federal funds rate and the interest rate on reserves gets bigger, the quantity demanded of reserves increases. If the federal funds rate is equal to the interest rate on reserves, the demand curve for reserves becomes flat. The supply of reserves is done by the Central bank only. When the supply curve for reserves is vertical, the monetary base is equal to the borrowed reserves. Reserve requirements are considered a tool of monetary policy The demand curve is vertical when the interest rate on reserves is equal to the federal funds rate. The cost of borrowing reserves is also known as discount rate. As long as the discount rate is greater than the federal funds rate, the borrowed reserves are equal to zero