reproduced here from your text (about page 514, Section 15.2.3) shows the market for federal funds when
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reproduced here from your text (about page 514, Section 15.2.3) shows the market for federal funds when the economy is away from the "flat portion" of the D curve. Notice that the supply of reserves is a vertical line (perfectly inelastic supply for a broad range of rates. This question is to be answered with the assumption that the economy is near an intersection of D and S where D is downward sloping and S is vertical. For example, the point in the graph showing R* and I*ff, where R* is the level of reserves and I*ff is the federal funds rate.
-What are 2 ways the FED can alter the supply of reserves? Do not include changing the reserve requirement.
-If the FED increases reserves, would that cause a lower or higher federal funds rate? Explain in a supply and demand context.
-If the FED decreases reserves, would that cause a lower or higher federal funds rate? Explain in a supply and demand context.
| FRED Graph Observations | | |||||||||||||||
| Federal Reserve Economic Data | ||||||||||||||||
| Link: https://fred.stlouisfed.org | ||||||||||||||||
| Help: https://fredhelp.stlouisfed.org | ||||||||||||||||
| Economic Research Division | ||||||||||||||||
| Federal Reserve Bank of St. Louis | ||||||||||||||||
| RESBALNS | Total Reserve Balances Maintained with Federal Reserve Banks (DISCONTINUED), Billions of Dollars, Monthly, Not Seasonally Adjusted | |||||||||||||||
| FEDFUNDS | Federal Funds Effective Rate, Percent, Monthly, Not Seasonally Adjusted | |||||||||||||||
| DFEDTARU | Federal Funds Target Range - Upper Limit, Percent, Monthly, Not Seasonally Adjusted | |||||||||||||||
| DFEDTARL | Federal Funds Target Range - Lower Limit, Percent, Monthly, Not Seasonally Adjusted | |||||||||||||||
| Earliest Perod | 2009.01 | Earliest Perod | 2017.03 | |||||||||||||
| Latest Period | 2020.08 | Latest Period | 2019.02 | |||||||||||||
| observation_date | Year | Year.Month | RESBALNS | FEDFUNDS | DFEDTARU | DFEDTARL | Check1 | observation_date | Year | Year.Month | RESBALNS | FEDFUNDS | DFEDTARU | DFEDTARL | Check1 | |
| 2009-01-01 | 2009 | 2009.01 | 820.669 | 0.15 | 0.25 | 0.00 | 1.00 | 2017-03-01 | 2017 | 2017.03 | 2326.253 | 0.79 | 0.88 | 0.63 | 1.00 | |
| 2009-02-01 | 2009 | 2009.02 | 662.192 | 0.22 | 0.25 | 0.00 | 1.00 | 2017-04-01 | 2017 | 2017.04 | 2281.420 | 0.90 | 1.00 | 0.75 | 1.00 | |
| 2009-03-01 | 2009 | 2009.03 | 741.020 | 0.18 | 0.25 | 0.00 | 1.00 | 2017-05-01 | 2017 | 2017.05 | 2225.769 | 0.91 | 1.00 | 0.75 | 1.00 | |
| 2009-04-01 | 2009 | 2009.04 | 844.528 | 0.15 | 0.25 | 0.00 | 1.00 | 2017-06-01 | 2017 | 2017.06 | 2206.547 | 1.04 | 1.13 | 0.88 | 1.00 | |
| 2009-05-01 | 2009 | 2009.05 | 865.312 | 0.18 | 0.25 | 0.00 | 1.00 | 2017-07-01 | 2017 | 2017.07 | 2233.323 | 1.15 | 1.25 | 1.00 | 1.00 | |
| 2009-06-01 | 2009 | 2009.06 | 771.976 | 0.21 | 0.25 | 0.00 | 1.00 | 2017-08-01 | 2017 | 2017.08 | 2344.015 | 1.16 | 1.25 | 1.00 | 1.00 | |
| 2009-07-01 | 2009 | 2009.07 | 758.906 | 0.16 | 0.25 | 0.00 | 1.00 | 2017-09-01 | 2017 | 2017.09 | 2295.735 | 1.15 | 1.25 | 1.00 | 1.00 | |
| 2009-08-01 | 2009 | 2009.08 | 790.761 | 0.16 | 0.25 | 0.00 | 1.00 | 2017-10-01 | 2017 | 2017.10 | 2245.701 | 1.15 | 1.25 | 1.00 | 1.00 | |
| 2009-09-01 | 2009 | 2009.09 | 884.206 | 0.15 | 0.25 | 0.00 | 1.00 | 2017-11-01 | 2017 | 2017.11 | 2314.455 | 1.16 | 1.25 | 1.00 | 1.00 | |
| 2009-10-01 | 2009 | 2009.10 | 1017.767 | 0.12 | 0.25 | 0.00 | 1.00 | 2017-12-01 | 2017 | 2017.12 | 2244.274 | 1.30 | 1.40 | 1.15 | 1.00 | |
| 2009-11-01 | 2009 | 2009.11 | 1102.446 | 0.12 | 0.25 | 0.00 | 1.00 | 2018-01-01 | 2018 | 2018.01 | 2214.601 | 1.41 | 1.50 | 1.25 | 1.00 | |
| 2009-12-01 | 2009 | 2009.12 | 1099.831 | 0.12 | 0.25 | 0.00 | 1.00 | 2018-02-01 | 2018 | 2018.02 | 2238.775 | 1.42 | 1.50 | 1.25 | 1.00 | |
| 2010-01-01 | 2010 | 2010.01 | 1070.701 | 0.11 | 0.25 | 2018-03-01 | 2018 | 2018.03 | 2167.009 | 1.51 | 1.58 | 1.33 | 1.00 | |||
| 2010-02-01 | 2010 | 2010.02 | 1183.755 | 0.13 | 0.25 | 2018-04-01 | 2018 | 2018.04 | 2086.192 | 1.69 | 1.75 | 1.50 | 1.00 | |||
| 2010-03-01 | 2010 | 2010.03 | 1143.627 | 0.16 | 0.25 | 2018-05-01 | 2018 | 2018.05 | 2022.453 | 1.70 | 1.75 | 1.50 | 1.00 | |||
| 2010-04-01 | 2010 | 2010.04 | 1076.456 | 0.20 | 0.25 | 2018-06-01 | 2018 | 2018.06 | 1988.224 | 1.82 | 1.89 | 1.64 | 1.00 | |||
| 2010-05-01 | 2010 | 2010.05 | 1070.761 | 0.20 | 0.25 | 0.00 | 1.00 | 2018-07-01 | 2018 | 2018.07 | 1949.820 | 1.91 | 2.00 | 1.75 | 1.00 | |
| 2010-06-01 | 2010 | 2010.06 | 1058.765 | 0.18 | 0.25 | 0.00 | 1.00 | 2018-08-01 | 2018 | 2018.08 | 1911.165 | 1.91 | 2.00 | 1.75 | 1.00 | |
| 2010-07-01 | 2010 | 2010.07 | 1046.938 | 0.18 | 0.25 | 0.00 | 1.00 | 2018-09-01 | 2018 | 2018.09 | 1873.866 | 1.95 | 2.03 | 1.78 | 1.00 | |
| 2010-08-01 | 2010 | 2010.08 | 1044.121 | 0.19 | 0.25 | 0.00 | 1.00 | 2018-10-01 | 2018 | 2018.10 | 1830.017 | 2.19 | 2.25 | 2.00 | 1.00 | |
| 2010-09-01 | 2010 | 2010.09 | 1006.743 | 0.19 | 0.25 | 0.00 | 1.00 | 2018-11-01 | 2018 | 2018.11 | 1775.291 | 2.20 | 2.25 | 2.00 | 1.00 | |
| 2010-10-01 | 2010 | 2010.10 | 998.508 | 0.19 | 0.25 | 0.00 | 1.00 | 2018-12-01 | 2018 | 2018.12 | 1691.394 | 2.27 | 2.35 | 2.10 | 1.00 | |
| 2010-11-01 | 2010 | 2010.11 | 997.742 | 0.19 | 0.25 | 0.00 | 1.00 | 2019-01-01 | 2019 | 2019.01 | 1639.030 | 2.40 | 2.50 | 2.25 | 1.00 | |
| 2010-12-01 | 2010 | 2010.12 | 1035.074 | 0.18 | 0.25 | 0.00 | 1.00 | 2019-02-01 | 2019 | 2019.02 | 1645.233 | 2.40 | 2.50 | 2.25 | 1.00 | |
| 2011-01-01 | 2011 | 2011.01 | 1066.213 | 0.17 | 0.25 | 0.00 | 1.00 | |||||||||
| 2011-02-01 | 2011 | 2011.02 | 1219.257 | 0.16 | 0.25 | 0.00 | 1.00 | |||||||||
| 2011-03-01 | 2011 | 2011.03 | 1391.358 | 0.14 | 0.25 | 0.00 | 1.00 | |||||||||
| 2011-04-01 | 2011 | 2011.04 | 1484.147 | 0.10 | 0.25 | 0.00 | 1.00 | |||||||||
| 2011-05-01 | 2011 | 2011.05 | 1546.486 | 0.09 | 0.25 | 1.00 | ||||||||||
| 2011-06-01 | 2011 | 2011.06 | 1622.346 | 0.09 | 0.25 | 0.00 | 1.00 | |||||||||
| 2011-07-01 | 2011 | 2011.07 | 1652.208 | 0.07 | 0.25 | 0.00 | 1.00 | |||||||||
| 2011-08-01 | 2011 | 2011.08 | 1621.060 | 0.10 | 0.25 | 0.00 | 1.00 | |||||||||
| 2011-09-01 | 2011 | 2011.09 | 1596.944 | 0.08 | 0.25 | 0.00 | 1.00 | |||||||||
| 2011-10-01 | 2011 | 2011.10 | 1592.447 | 0.07 | 0.25 | 0.00 | 1.00 | |||||||||
| 2011-11-01 | 2011 | 2011.11 | 1546.124 | 0.08 | 0.25 | 0.00 | 1.00 | |||||||||
| 2011-12-01 | 2011 | 2011.12 | 1550.043 | 0.07 | 0.25 | 0.00 | 1.00 | |||||||||
| 2012-01-01 | 2012 | 2012.01 | 1568.915 | 0.08 | 0.25 | 0.00 | 1.00 | |||||||||
| 2012-02-01 | 2012 | 2012.02 | 1609.775 | 0.10 | 0.25 | 0.00 | 1.00 | |||||||||
| 2012-03-01 | 2012 | 2012.03 | 1557.859 | 0.13 | 0.25 | 0.00 | 1.00 | |||||||||
| 2012-04-01 | 2012 | 2012.04 | 1537.808 | 0.14 | 0.25 | 0.00 | 1.00 | |||||||||
| 2012-05-01 | 2012 | 2012.05 | 1510.119 | 0.16 | 0.25 | 0.00 | 1.00 | |||||||||
| 2012-06-01 | 2012 | 2012.06 | 1507.596 | 0.16 | 0.25 | 0.00 | 1.00 | |||||||||
| 2012-07-01 | 2012 | 2012.07 | 1535.052 | 0.16 | 0.25 | 0.00 | 1.00 | |||||||||
| 2012-08-01 | 2012 | 2012.08 | 1532.976 | 0.13 | 0.25 | 0.00 | 1.00 | |||||||||
| 2012-09-01 | 2012 | 2012.09 | 1468.681 | 0.14 | 0.25 | 0.00 | 1.00 | |||||||||
| 2012-10-01 | 2012 | 2012.10 | 1476.730 | 0.16 | 0.25 | 0.00 | 1.00 | |||||||||
| 2012-11-01 | 2012 | 2012.11 | 1497.506 | 0.16 | 0.25 | 0.00 | 1.00 | |||||||||
| 2012-12-01 | 2012 | 2012.12 | 1517.425 | 0.16 | 0.25 | 0.00 | 1.00 | |||||||||
| 2013-01-01 | 2013 | 2013.01 | 1582.524 | 0.14 | 0.25 | 0.00 | 1.00 | |||||||||
| 2013-02-01 | 2013 | 2013.02 | 1680.086 | 0.15 | 0.25 | 0.00 | 1.00 | |||||||||
| 2013-03-01 | 2013 | 2013.03 | 1760.359 | 0.14 | 0.25 | 0.00 | 1.00 | |||||||||
| 2013-04-01 | 2013 | 2013.04 | 1832.952 | 0.15 | 0.25 | 0.00 | 1.00 | |||||||||
| 2013-05-01 | 2013 | 2013.05 | 1930.723 | 0.11 | 0.25 | 0.00 | 1.00 | |||||||||
| 2013-06-01 | 2013 | 2013.06 | 2010.604 | 0.09 | 0.25 | 0.00 | 1.00 | |||||||||
| 2013-07-01 | 2013 | 2013.07 | 2094.225 | 0.09 | 0.25 | 0.00 | 1.00 | |||||||||
| 2013-08-01 | 2013 | 2013.08 | 2199.056 | 0.08 | 0.25 | 0.00 | 1.00 | |||||||||
| 2013-09-01 | 2013 | 2013.09 | 2281.080 | 0.08 | 0.25 | 0.00 | 1.00 | |||||||||
| 2013-10-01 | 2013 | 2013.10 | 2374.958 | 0.09 | 0.25 | 0.00 | 1.00 | |||||||||
| 2013-11-01 | 2013 | 2013.11 | 2463.012 | 0.08 | 0.25 | 0.00 | 1.00 | |||||||||
| 2013-12-01 | 2013 | 2013.12 | 2485.248 | 0.09 | 0.25 | 0.00 | 1.00 | |||||||||
| 2014-01-01 | 2014 | 2014.01 | 2498.153 | 0.07 | 0.25 | 0.00 | 1.00 | |||||||||
| 2014-02-01 | 2014 | 2014.02 | 2593.879 | 0.07 | 0.25 | 0.00 | 1.00 | |||||||||
| 2014-03-01 | 2014 | 2014.03 | 2623.027 | 0.08 | 0.25 | 0.00 | 1.00 | |||||||||
| 2014-04-01 | 2014 | 2014.04 | 2660.368 | 0.09 | 0.25 | 0.00 | 1.00 | |||||||||
| 2014-05-01 | 2014 | 2014.05 | 2635.180 | 0.09 | 0.25 | 0.00 | 1.00 | |||||||||
| 2014-06-01 | 2014 | 2014.06 | 2668.354 | 0.10 | 0.25 | 0.00 | 1.00 | |||||||||
| 2014-07-01 | 2014 | 2014.07 | 2704.004 | 0.09 | 0.25 | 0.00 | 1.00 | |||||||||
| 2014-08-01 | 2014 | 2014.08 | 2786.867 | 0.09 | 0.25 | 0.00 | 1.00 | |||||||||
| 2014-09-01 | 2014 | 2014.09 | 2759.284 | 0.09 | 0.25 | 0.00 | 1.00 | |||||||||
| 2014-10-01 | 2014 | 2014.10 | 2705.668 | 0.09 | 0.25 | 0.00 | 1.00 | |||||||||
| 2014-11-01 | 2014 | 2014.11 | 2519.578 | 0.09 | 0.25 | 0.00 | 1.00 | |||||||||
| 2014-12-01 | 2014 | 2014.12 | 2606.700 | 0.12 | 0.25 | 0.00 | 1.00 | |||||||||
| 2015-01-01 | 2015 | 2015.01 | 2683.709 | 0.11 | 0.25 | 0.00 | 1.00 | |||||||||
| 2015-02-01 | 2015 | 2015.02 | 2496.868 | 0.11 | 0.25 | 0.00 | 1.00 | |||||||||
| 2015-03-01 | 2015 | 2015.03 | 2675.202 | 0.11 | 0.25 | 0.00 | 1.00 | |||||||||
| 2015-04-01 | 2015 | 2015.04 | 2698.960 | 0.12 | 0.25 | 0.00 | 1.00 | |||||||||
| 2015-05-01 | 2015 | 2015.05 | 2584.359 | 0.12 | 0.25 | 0.00 | 1.00 |
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Answer Here are the answers to your questions 1 Two ways the Fed can alter the supply of reserves a ... View the full answer
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