Reserve balances rate is higher than federal funds rate

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When the interest on reserve balances rate is higher than the federal funds rate, how will arbitrage pull the two rates together? The increase in competition for funds in the federal funds market will pull the federal funds rate higher. b. The increase in competition for funds in the federal funds market will push the federal funds rate lower. c. When banks deposit funds in their reserve accounts at the Fed, it will pull the interest on reserve balances rate higher. d. When banks deposit funds in their reserve accounts at the Fed, it will push the interest on reserve balances rate lower.

Reference no: EM133636536

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