Using T-accounts, explain what happens to reserves when the Federal Reserve sells T- bills. 3) Because it is the case that T-bills are considered safe assets, when any unusual event occurs, there is normally a rush into T-bills, i.e., the demand for T-bills increases. Using words and graphs, explain what will happen to the interest rate on T-bills. Now explain what impact this will have on the federal funds rate, again using both words and graphs.

Using T-accounts, explain what happens to reserves when the Federal Reserve sells T- bills. 3) Because it is the case that T-bills are considered safe assets, when any unusual event occurs, there is normally a rush into T-bills, i.e., the demand for T-bills increases. Using words and graphs, explain what will happen to the interest rate on T-bills. Now explain what impact this will have on the federal funds rate, again using both words and graphs.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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