Suppose We the demand tor federal funds curve is such that the quantity of funds

Question

Suppose We the demand tor federal funds curve is such that the quantity of funds demanded changes by $160 billion for each 1 percent change in the federal funds interest rate Also assume that the current federal funds rate is at the 3 percent rate that is targeted by the Fed Now suppose that the Fed retargets the rate to 25 percent a. Assuming no change in demand will the Fed need to increase or decrease the supply of federal funds? b. By how much will the quantify of federal funds have to change for the equilibrium to occur at the new target rate?

Explanation / Answer

increase

that is equlas to 0.5%, in billions it is equlas to $80

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.