Will the fed need to increase or decrease the supply

Reference no: EM13214310

Suppose that the demand for Federal funds curve is such that the quantity of funds demanded changes by $160billion 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 1.5 percent.

Assuming no change in demand, will the Fed need to increase or decrease the supply of Federal funds?

By how much will the quantity of Federal funds have to change for the equilibrium to occur at the new target rate?

Reference no: EM13214310

Questions Cloud

Explain ice to cool a concentrated nacl solution : Home ice cream makers use ice to cool a concentrated NaCl solution below the normal freezing point of water. What molal concentration of salt is needed to lower the freezing point to -4.49 C?

Why to use the appropriate aggregate demand : Compare and contrast the economic performance of the American economy of 2001 with the economic performance of the 1996 to 2001 period. Use the appropriate aggregate demand and aggregate supply curves

Explain the ideal van''t hoff factor for nacl : water in order to raise the boiling point of the solution by 0.5 C? Assume the ideal van't Hoff factor for NaCl.

Explain a block of ice suspended between two chairs : As a demonstration, an instructor had a block of ice suspended between two chairs. She then hung a wire over the block of ice, with weights attached to the ends of the wire.

Will the fed need to increase or decrease the supply : Suppose that the demand for Federal funds curve is such that the quantity of funds demanded changes by $160billion for each 1 percent change in the Federal funds interest rate. Also, assume that the current Federal funds rate is at the 3 percent r..

Explain rna fingerprinting : Write a short article about how chromatography is used in every day life. I've been unsuccessful finding much information on exactly how and why it is used for any specific task

Compute the freezing and boiling points : calculate the freezing and boiling points of each of the following solutions. 0.40 mol ethylene glycol and 0.17mol KBr in 122 g H2O.

Explain how many quartz of ethylene glycol : How many quartz of ethylene glycol, C2H6O2 (density = 1.116 g/mL). Will have to be added to 5 gal of water (density = 1 g/mL) to protect an automobile radiator down to a temperature of-10 oF?

What is the years rate of inflation : If the CPI was 110 last year and is 121 this year, what is this year's rate of inflation In contrast, suppose that the CPI was 110 last year and is 108 this year. What is this year's rate of inflation What term do economists use to describe this s..

User Account

All Pages