1. Which of the following statements are true about the supply and demand curve for reserves?
A The demand curve flattens out at the fed funds rate
B The supply curve flattens out at the discount rate
C The quantity demanded of fed funds increases at a higher fed funds rate
D The supply of reserves is elastic (upward sloping)
2. Which of the following statements is true about interest on excess reserves?
A Interest is not paid on required reserves, only excess reserves
B It allows the Fed to have better control over the Fed Funds rate
C The Fed began paying interest on excess reserves in 2006
D All of the above
3. The Fed is most likely to sell securities, thus withdrawing reserves from the banking system, to raise short term market rates.
A True
B False