Use the market for central bank money to answer this question. Graphically illustrate and explain what effect an increase in the reserve deposit ratio (?) will have on this market and on the equilibrium interest rate

What will be an ideal response?

An increase in the parameter ? will cause an increase in banks' demand for reserves and, therefore, an increase in the demand for central bank money. This will cause an excess demand for central bank money at the initial interest rate. In this case, the interest rate will rise to restore equilibrium.