If the Fed Raises the Interest Rate Paid on Excess

question 184

Multiple Choice

If the Fed raises the interest rate paid on excess reserves while holding the federal funds rate unchanged, then banks will

• A) lend more reserves in the federal funds market and keep more excess reserves.
• B) lend fewer reserves in the federal funds market and keep more excess reserves.
• C) not keep excess reserves or lend reserves in the federal funds market.
• D) not react to it.

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