Which of the following statements about the supply of reserves in the reserve market is​ true?

Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506725
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter13: Money And The Banking System
Section: Chapter Questions
Problem 8CQ
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Which of the following statements about the supply of reserves in the reserve market is​ true?

 

A.

The supply of reserves is horizontal​ (perfectly elastic) above the discount​ rate, because banks would not lend reserves in the reserve market at a rate above the discount rate

 

B.

The supply of reserves is horizontal​ (perfectly elastic) above the discount​ rate, because banks would not borrow reserves in the reserve market at a rate above the discount rate

 

C.

Only nonborrowed reserves are relevant for determining the supply of reserves in the reserve market

 

D.

The supply of reserves is unrelated to the amount of securities held by the central bank.

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