Question

In the market for federal funds, if the federal funds rate is between the discount rate and the interest rate paid on excess reserves by the Fed, a ________ in required reserves ________ the demand for reserves, raising the federal funds interest rate, everything else held constant.

Answer 1

decrease; increases

Step-by-step explanation:

The principles of demand and supply occurs here.

For example, The effects of a change in supply of reserves on demand is evident when supply of reserves increases and in turn the reserves get cheaper. This will make banks want more of reserves because it benefits them.

However, reverse is the case of the interest rates decreases.