Suppose, one morning the Open Market Trading Desk drastically underestimates the demand for reserves when deciding the

Question:

Suppose, one morning the Open Market Trading Desk drastically underestimates the demand for reserves when deciding the quantity of reserves to supply to the market. Based on analysis of the market for bank reserves, explain why the market federal funds rate will not exceed the regardless of the size of the gap between estimated and actual reserve demand

Discount Rate
Depending upon the context, the discount rate has two different definitions and usages. First, the discount rate refers to the interest rate charged to the commercial banks and other financial institutions for the loans they take from the Federal...