22) In the market for reserves, a lower interest rate paid on excess reserves A)

Question

22) In the market for reserves, a lower interest rate paid on excess reserves A) increases the supply of reserves.

B) decreases the effective floor for the federal funds rate. C) increases the effective floor for the federal funds rate. D) decreases the supply of reserves.

23) Everything else held constant, in the market for reserves, when the federal funds rate is 3%, raising the discount rate from 5% to 6%

A) has an indeterminate effect on the federal funds rate. B) raises the federal funds rate.
C) has no effect on the federal funds rate.

D) lowers the federal funds rate.

24) In the market for reserves, if the federal funds rate is between the discount rate and the interest rate paid on excess reserves, a ________ in the reserve requirement ________ the demand for reserves, lowering the federal funds interest rate, everything else held constant.

A) decline; increases B) rise; increases C) decline; decreases D) rise; decreases

Explanation / Answer

22) In the market of reserves, a lower interest rate paid on excess reserves

b) decreases the effective floor for the federal fund rates.

Excess reserve refers to the additional money that namks holds besides their required reserve amount.

23) Everything else held constant, in the market for reserves, when the federal fund rate is 3%, raising the discount rate from 5% to 6%

c) Has no effect on the federal funds rate.

24) In the market for reserves, if the federal fund rate and the interest rate paid on excess reserves, a rise in the reserve requirement increase the demand for reserves, lowering the federal funds interest rate, everything else held constant.

b) rise; increase

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