Final answer:
The true statement as it relates to banks and the federal funds market is: c) Banks with less than the reserve requirement need overnight loans to meet their obligations. The true statement about banks and the federal funds market is that banks needing to meet the reserve requirement may take overnight loans. The federal funds rate applies to these loans, and it is influenced by open market operations, not via taxation.
Step-by-step explanation:
The federal funds rate is the interest rate that banks charge each other for overnight loans to meet the reserve requirement. It is not charged on an annual basis, but daily for the overnight borrowing. The Federal Open Market Committee (FOMC) uses open market operations, not taxation, to control the money supply. The federal funds market didn't develop due to banks losing customers but as a mechanism for banks to lend to each other overnight to meet their reserve requirements. The true statement as it relates to banks and the federal funds market is Banks with less than the reserve requirement need overnight loans to meet their obligations.