If the Fed raised the reserve requirement, the demand for reserves would
A)increase, so the federal funds rate would fall.
B)increase, so the federal funds rate would rise.
C)decrease, so the federal funds rate would fall.
D)decrease, so the federal funds rate would rise.

Question

Quizplus · Accepted Answer

When the Federal Reserve raises the reserve requirement, banks must hold more reserves, increasing the demand for reserves. This higher demand typically leads to an increase in the federal funds rate, as banks are willing to pay more to borrow reserves to meet the new requirements.

If the Fed Raised the Reserve Requirement, the Demand for Reserves