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Sagot :
The large stock of reserves outstanding should result in the fed funds rate equaling the interest on excess reserves if the commercial banks will be indifferent between the two options.
When the Federal Funds Rate is higher than the Reserves Rate banks seek to increase their return on funds by withdrawing funds from reserve accounts at the Federal Reserve and lending those funds on the Federal Funds Market.
When the Federal Reserve raises interest rates the market price of existing bonds immediately falls. New bonds will soon hit the market, offering higher interest payments to investors. Paying interest on bank reserve balances is a common monetary policy tool available to major central banks.
Learn more about Federal Reserve here:-https://brainly.com/question/25817380
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