1. Which of the following statements are true about the supply and demand curve for reserves?

A The demand curve flattens out at the fed funds rate

B The supply curve flattens out at the discount rate

C The quantity demanded of fed funds increases at a higher fed funds rate

D The supply of reserves is elastic (upward sloping)

2. Which of the following statements is true about interest on excess reserves?

A Interest is not paid on required reserves, only excess reserves

B It allows the Fed to have better control over the Fed Funds rate

C The Fed began paying interest on excess reserves in 2006

D All of the above

3. The Fed is most likely to sell securities, thus withdrawing reserves from the banking system, to raise short term market rates.

A True

B False