On a Graph of the Supply and Demand for Reserves

question 59

Multiple Choice

On a graph of the supply and demand for reserves representing a central bank using the channel system, if the demand curve intersects the leftmost horizontal portion of the supply curve, the equilibrium overnight rate equals

• A) the interest rate on reserves.
• B) the discount rate.
• C) the repo rate.
• D) none of the above.

---

Definitions:

Corporate Decision

Strategic choices made by a company’s management that influence its operations, finances, and overall business direction.

R&D Activity

Research and Development activities involve investigative projects to discover new knowledge and use it to develop new products, processes, or services.

Interest-Rate Cost of Funds

The cost incurred by financial institutions for the funds they use in their operations, influenced by prevailing market interest rates.

Interest-Rate Cost-of-Funds Curve

A graphical representation that shows the relationship between the cost of funds for a financial institution and the interest rate over a period of time.