You are given the following information about the market for reserves. The current federal funds rate is 1.5%, the discount rate is 2.0%, the interest rate paid on reserves is 1.0%, and the Fed owns $600 billion in government securities.

1. Suppose banks are worried that tariffs will hurt the agricultural industry. As a result, banks are being more cautious with their lending. Banks are holding extra cash rather than making loans.

Select all that apply. Question options:

___ The demand for reserves would increase.

___ The demand for reserves would decrease.

___ The supply of reserves would increase.

___ The supply of reserves would not change.

___ The equilibrium federal funds rate would increase.

___ The equilibrium federal funds rate would decrease.

___ The equilibrium federal funds rate would remain unchanged.