The graph shows the demand curve for reserves in the market for bank reserves. The federal funds target rate is 4 percent. Draw the supply curve of...

The graph shows the demand curve for reserves in the market for bank reserves.

The federal funds target rate is 4 percent.

Draw the supply curve of reserves to achieve the federal funds rate. Label it.

Draw a point at the equilibrium in the market for bank reserves.

Choose the statement that is incorrect.

A. The higher the federal funds rate, the smaller is the quantity of reserves demanded

B. Banks hold reserves to meet the required reserve ratio and so that they can make payments

C. Bank reserves are costly to hold because they can be loaned in the federal funds market and earn the feral funds rate.

D. The Fed's open market operations determine the demand for reserves