... to help the student see how all the parts interact Use the book’s “four quadrant diagrams” (Figures 14. 6a, 14. 6b, 14. 6c, and 14. 6d as well as 14. 7a, 14. 7b, 14. 7c, and 14. 7d) to show the students... reserves rather than loaning them So the higher the federal funds rate, the smaller the quantity of reserves demanded As shown in the figure, the demand curve for reserves is downward sloping The Fed’s... Goal: The Fed tracks the output gap, the percentage deviation of real GDP from potential GDP The Fed tries to minimize the output gap Responsibility for Monetary Policy    The Role of the Fed The