Question

assume the banking system in zenobia has ample reserves. which of the following reserve market graphs demonstrates the effect of the central bank of zenobia increasing its administered interest rates?

Explanation:

When a central bank increases administered interest rates (like the interest on reserves) in a system with ample reserves, the demand curve for reserves shifts upward. The horizontal segment of the demand curve (which aligns with the administered rate) rises, and the equilibrium policy rate increases from $PR_1$ to $PR_2$, with no change in the quantity of reserves (since supply is vertical and ample). This matches the change shown in graph B.

Answer:

B. [Graph showing the horizontal segment of the demand curve for reserves shifting upward, increasing the policy rate from $PR_1$ to $PR_2$ with no change in reserve quantity]