1) In the market for reserves, when the federal funds interest rate is below the discount rate, the supply curve of reserves is
A) vertical.
B) horizontal.
C) positively sloped.
D) negatively sloped.
2) When the federal funds rate equals the discount rate
A) the supply curve of reserves is vertical.
B) the supply curve of reserves is horizontal.
C) the demand curve for reserves is vertical.
D) the demand curve for reserves is horizontal.
3) In the market for reserves, if the federal funds rate is above the interest rate paid on excess reserves, then an open market ________ the supply of reserves, raising the federal funds interest rate, everything else held constant.
A) sale decreases
B) sale increases
C) purchase increases
D) purchase decreases
4) In the market for reserves, if the federal funds rate is above the interest rate paid on excess reserves, an open market purchase ________ the ________ of reserves which causes the federal funds rate to fall, everything else held constant.
A) increases; supply
B) increases; demand
C) decreases; supply
D) decreases; demand