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Holding everything else constant, if the federal funds rate rises, then the demand for A visual...

Holding everything else constant, if the federal funds rate rises, then the demand for
A visual representation would really help!
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Answer #1

Excess reserves falls because they have a higher cost.

.

Other than above:

.
Borrowing cost rises

Money supply in market decreases

Cost of funds increases


By increasing federal funds rate fed reduces the overall supply of the money in market

Effect of Higher fed rates > Low borrowings > Higher cost for keeping funds > Lower income for banks due to lesser borrowing > Lower Growth rate overall

(I am using mobile to answer hence, representing the effect of higher fed rates results so and so... Hope that helps)

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