Using the supply and demand analysis of the market for reserves , indicate what happens to to the federal funds rate, borrowed reserves and non borrowed reserves, holding everything else constant, under the following situations: a) The economy is surprisingly strong, leading to an increase in the amount of checkable deposits. b) Banks expect an unusually large increase in withdrawals from checking deposit accounts in the future.

Using the supply and demand analysis of the market for reserves , indicate what happens to to the federal funds rate, borrowed reserves and non borrowed reserves, holding everything else constant, under the following situations: a) The economy is surprisingly strong, leading to an increase in the amount of checkable deposits. b) Banks expect an unusually large increase in withdrawals from checking deposit accounts in the future.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Using the supply and demand analysis of the
market for reserves , indicate what happens to
to the federal funds rate, borrowed reserves
and non borrowed reserves, holding
everything else constant, under the following
situations:
a) The economy is surprisingly strong,
leading to an increase in the amount of
checkable deposits.
b) Banks expect an unusually large increase in
withdrawals from checking deposit accounts
in the future.

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