Question

In the market for reserves, a decline in the reserve requirement ________ the ________ curve of reserves and causes the federal funds interest rate to fall, everything else held constant.

Answer 1

Step-by-step explanation:

Shortens, Vertical Section Of The Supply

Answer 2

Shortens,

vertical section of the supply

Step-by-step explanation:

In the market for reserves a decline in the reserve requirement shortens the vertical section of the supply curve of reserves and this will also cause the federal funds interest rate to fall,

Given that every other thing is kept constant

The federal funds interest is an interest rate charged by banks when lending or borrowing excess reserves from each other overnight