Respuesta :
If the Fed raised the reserve requirement, the demand for reserves would increase, so the federal funds rate would also rise.
With the increase in the reserve requirement, the banks are now required to keep more reserves than before in order to meet withdrawal requirements. This will increase the demand for reserves which inturn will increase the federal funds because the banks will keep more amount of money with them as reserve.
Reserve ratio is the rate which describes the amount of money kept as cash by a bank. Reserve ratio is regulated to be kept in reserve so that the bank can fulfill its needs to loan funds to consumers. When the reserve ratio is decreased, there is an increament in the money supply and viceversa.
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