Within the market for reserves, an increase in the quantity of reserves results in a
A) rise in the equilibrium real wage rate.
B) fall in the equilibrium federal funds rate.
C) fall in the equilibrium money wage rate.
D) rise in the equilibrium federal funds rate.

Question

Quizplus · Accepted Answer

An increase in the quantity of reserves typically leads to a fall in the equilibrium federal funds rate because more reserves in the banking system reduce the need for banks to borrow from each other, thus lowering the interest rate.

Within the Market for Reserves, an Increase in the Quantity