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1. For each of the following, use the supply and demand of reserves to make the...

1. For each of the following, use the supply and demand of reserves to make the necessary changes describe the type of policy that the Fed would need to conduct (if any) and indicate what happens to the market (effective) federal funds rate.

a. Holiday shopping season causes banks to increases holdings of excess reserves. The Fed decides not to react.

b. Holiday shopping season causes banks to increases holdings of excess reserves. The Fed decides to react to keep the federal funds rate at the target.

c. Fed decides to raise interest rate on reserve balances above the current equilibrium federal funds rate

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