If the Fed uses nonborrowed reserves,a reserve aggregate,as a target,an increase in the demand for reserves will result in a(n)________ in ________.
A) increase; nonborrowed reserves
B) decrease; nonborrowed reserves
C) increase; the federal funds interest rate
D) decrease; the federal funds interest rate

Question

Quizplus · Accepted Answer

If the Fed targets nonborrowed reserves and the demand for reserves increases, the federal funds interest rate will rise because the supply of reserves is fixed, leading to higher competition for available reserves.

If the Fed Uses Nonborrowed Reserves,a Reserve Aggregate,as a Target,an