Instructions: The remaining questions are about the demand and supply for scarce or ample reserves. You are not...

Instructions: The remaining questions are about the demand and supply for scarce or ample reserves. You are not required to draw graphs, but drawing graphs may help determine the correct answer. For all questions, the correct answer is either: increase, decrease, or remain unchanged.

With scarce reserves, if the downward sloping demand for reserves intersects the vertical part of the supply curve, an open market sale will cause the federal funds rate to ________

With scarce reserves, if the downward sloping demand for reserves intersects the vertical part of the supply curve, an increase in required reserves will cause the federal funds rate to ________

With scarce reserves, if the downward sloping demand for reserves intersects the vertical part of the supply curve, a decrease in the interest on reserves will cause the federal funds rate to _________

With scarce reserves, if the federal funds rate equals the discount rate, an increase in the discount rate will cause the federal funds rate to _________

Expert Solution

With scarce reserves, if the downward sloping demand for reserves intersects the vertical parts of the supply curve, an open market sale will cause the federal funds rate to rise because an open market purchase will cause the federal funds rate to fall.

With scarce reserves, if the downwadd sloping demand for reserves intersects the vertical parts of the supply curve, an increase in required curve will cause the federal funds rate to fall because if there is decrease in required curve will cause the federal funds rate to rise.

With scarce reserves, if the downward sloping demand for reserves intersects the vertical parts of the supply curve, a decrease in the interset on reserves will cause the federal funds rate to decrease because the lower interset rate on reserves will also reduce the federal funds and rise in interset rate increase the federal reserves.

With scarce reserves, if the federal funds rate equals to discount rate, an increase in the discount rate will cause the federal funds rate to decrease because in the market for reserves, when the federal funds equals the discount rate, lowering the discount rate and a decrease in the discount rate will cause the federal funds rate to increase.

Rahul Sunny answered 2 years ago

If reserves are scarce, how would the money supply M change (increase or decrease)

If reserves are scarce, how would the money supply M change (increase or decrease) and why (due to an increase, decrease, or no change in the monetary base B, in the reserve-deposit ratio rr, or in the currency-deposit ratio cr) if:(a) the central bank conducts overnight repurchase operations.(b) the central bank conducts overnight reverse repurchase operations.(c) the central bank increases the required reserve-deposit ratio.(d) an article reporting a significant surge in cases involving counterfeit currency becomes viral.(e) all drugs are...

If reserves are scarce, how would the money supply M change (increase or decrease) and why...

If reserves are scarce, how would the money supply M change (increase or decrease) and why (due to an increase, decrease, or no change in the monetary base B, in the reserve-deposit ratio rr, or in the currency-deposit ratio cr) if: a) an article reporting a significant surge in cases involving counterfeit currency becomes viral. b) all drugs are legalized. Just analyze in these two situations how would money supply change. The question is complete, if you can't give answer...

1) For the each of the following, use the supply and demand of reserves to make...

1) For the each of the following, use the supply and demand of reserves to make the necessary changes and indicate what happens to the market (effective) federal funds rate. a. Holiday shopping season causes banks to increases holdings of excess reserves. The Fed decides not to react. b. Holiday shopping season causes banks to increases holdings of excess reserves. The Fed decides to react to keep the federal funds rate at the target. t — c. Board of Governors...

Use the supply and demand analysis of the market for reserves to explain the following situations....

Use the supply and demand analysis of the market for reserves to explain the following situations. If a switch occurs from deposits into currency, what happens to the federal funds rate? Why is it that a decrease in the discount rate does not normally lead to an increase in borrowed reserves? What happens to the federal funds rate, borrowed reserves, and nonborrowed reserves, holding everything else constant. The economy is surprisingly strong, leading to an increase in the amount of...

Using the supply and demand analysis of the market for reserves, indicate what happens to the...

Using the supply and demand analysis of the market for reserves, indicate what happens to the federal funds rate (the cash rate in Australia), borrowed reserves, and nonborrowed reserves in the following situations holding everything else constant. (a) The Fed (central bank) raises the target federal funds rate. (b) The Fed (central bank) raises the interest rate on reserves above the current equilibrium federal funds rate (the cash rate).

What do you know about scarce resources? Can you name a few scarce resources and how...

What do you know about scarce resources? Can you name a few scarce resources and how it is diminishing

Using supply and demand analysis of the market for reserves, show and explain what happens to...

Using supply and demand analysis of the market for reserves, show and explain what happens to the federal funds rate under the following situations: a. The Fed reduces reserve requirements b. A switch occurs from deposits into currency c. Banks expect a large increase in withdrawals from checking accounts d. The Fed conducts an open market sale of securities

22. Using the supply and demand analysis of the market for reserves, indicate what happens to...

22. Using the supply and demand analysis of the market for reserves, indicate what happens to the federal funds rate, borrowed reserves, and nonborrowed reserves, holding everything else constant, under the following situations: d) The Fed raises the interest rate on reserves above the current equilibrium federal funds rate. e) The Fed reduces reserve requirements. f) The Fed reduces reserve requirements and then offsets this action by conducting an open market sale of securities.

Using the supply and demand for reserves graphs, show how the following events affects the federal...

Using the supply and demand for reserves graphs, show how the following events affects the federal fund rate, monetary base, non-borrowed reserves, borrowed reserves, the money multiplier, and the money supply. Assume the federal fund rate is equal to the discount rate. The Fed performs an open market sale.

What determines the demand for reserves by banks? The supply? How do open market operations affect...

What determines the demand for reserves by banks? The supply? How do open market operations affect the supply of reserves? A change in the discount rate?

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