Question

In the market for​ reserves, if the federal funds rate is between the discount rate and the interest rate paid on excess​ reserves, an increase in the reserve requirement​ ________ the demand for​ reserves, ________ the federal funds​ rate, everything else held constant. A. ​decreases; raising B. ​increases; raising C. ​decreases; lowering D. ​increases; lowering

Answer 1

The correct answer is B. ​increases; raising.

Step-by-step explanation:

A reserve requirement is imposed by regulators (generally central banks) before banks. It is a proportion of deposits that must be made by a bank rather than being borrowed from borrowers. The reservation requirement is usually carried out in a bank account with the central bank.

The main purpose of a reserve requirement is to control growth in the money supply, but its importance has diminished over the years. A reservation requirement is usually a single percentage of the digit