An increase or a decrease in the federal funds rate

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Reference no: EM131303002

If the Fed uses the federal funds rate as a policy instrument, will increases in the demand for reserves lead to an increase or a decrease in the level of reserves?

If the Fed uses the level of reserves as a policy instrument, will increases in the demand for reserves lead to an increase or a decrease in the federal funds rate? Support your answers with a graph of the demand and supply of reserves.

Reference no: EM131303002

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