Question

The graph shows the demand curve for bank reserves, RD The cutrent quarfity of reserves supplied is $20 billion Label it 1 The Fed wants to set the federal funds rate at 4 percent a year Draw a point to show the new equilibrium federal funds rate Label 2 Dau a point on tcts cate when the wanty ofresenes suppied s $2 bilion Dran a supply of seseves curve that achierves the target Labelit To change the federal funds rate from 5 percent a year to 4 percent a year the Fed conducts an open market of securities and foldre tre inatrucions to oreate your glapt O Type here to search

Answer 1

Open market purchase of securities increase supply of reserves in the market and decreases interest rate from 5% to 4%.