Essay
In problem 3 above suppose the supply of nonborrowed reserves falls to $490 million due to open-market sales by the central bank. Holding all other factors constant what happens to the equilibrium Federal funds interest rate? If nonborrowed reserves drop to $490 million while borrowed reserves increase to $56 million, all else held equal, what happens to the equilibrium funds rate?
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According to the above formula: $490 mil...View Answer
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