Use the supply and demand analysis of the market for reserves to visually illustrate and explain how the following scenarios may arise in equilibrium. a) A decrease in reserve requirements changes borrowed reserves from positive to zero without changing the federal funds rate.   *Please use the federal fund rate and reserve diagram for this question. I have attached an example the type of graph to use **EXAMPLE OF TYPE OF GRAPH TO USE

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Use the supply and demand analysis of the market for reserves to visually illustrate and explain how the following scenarios may arise in equilibrium.

a) A decrease in reserve requirements changes borrowed reserves from positive to zero without changing the federal funds rate.  

*Please use the federal fund rate and reserve diagram for this question. I have attached an example the type of graph to use

**EXAMPLE OF TYPE OF GRAPH TO USE

Federal fund rate
FFR
FFR
Panel (A)
SR₁ SR2
2
DR
Reserves
Panel (B)
Federal fund rate
SR₁ SR₂
N
1 2
FFR=FFR₁
DR
Reserves
Transcribed Image Text:Federal fund rate FFR FFR Panel (A) SR₁ SR2 2 DR Reserves Panel (B) Federal fund rate SR₁ SR₂ N 1 2 FFR=FFR₁ DR Reserves
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