“The federal funds rate can never be below the interest rate paid on reserves.” Is this statement true, false, or uncertain? Explain your answer.

The federal funds rate is the objective interest rate set by the Fed at which commercial banks acquire and loan their additional stores to another short-term.

The market for reserves model demonstrates that once the fed funds rate arrives at the discount rate, it could never outperform the discount rate since banks would then acquire straightforwardly from the Fed, and not in the fed funds market, which would forestall the fed funds rate from truly increasing over the discount rate. Nonetheless, by and by, the fed funds rate has been over the discount rate. This might happen because of the disgrace related with banks acquiring straightforwardly from the Fed. That is banks might like to pay a higher market rate than to get straightforwardly from the Fed and cause the apparent shame. Furthermore, nonbank monetary foundations, which don't approach the discount window, can and do take an interest in the federal funds market The degree to which nonbank monetary organizations take part in the fed funds market might imply that the hole when the fed funds rate is over the discount rate may not be arbitraged away.

The market for reserves model demonstrates that once the fed funds rate arrives at the discount rate, it could never outperform the discount rate since banks would then acquire straightforwardly from the Fed, and not in the fed funds market, which would forestall the fed funds rate from truly increasing over the discount rate. So the given statement is uncertain.