Question: In a graph of the market for bank reserves show
In a graph of the market for bank reserves, show how the Federal Reserve limits deviations of the market federal funds rate from its interest rate target under the channel system. Next, show how the Open Market Trading Desk would implement a decision by the FOMC to raise the target federal funds rate. Assume that the Fed alters the discount and deposit rates to maintain fixed spreads between them and the target federal funds rate.
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