Question

As long as the federal funds interest rate remains within the corridor, an increase in the quantity of reserves results in a________.

Answer 1

Assuming that the federal funds rate remains within a corridor, if the quantity of reserves increases, this leads to a lower federal funds rate.

What happens when the quantity of reserves increases?

When the quantity of reserves that a bank holds increases, then there will be less need for it to borrow funds from other banks to make up for any reserve shortfall.

This leads to a drop in the federal funds rate which is the rate at which banks borrow from each other.

Find out more on the federal fund rate at https://brainly.com/question/14968110

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