Question 20 1 pts The following graph shows a hypothetical demand function for federal funds. Currently, the total amount of reserves in the banking system is $120 billion, the discount rate is 3.5 percent, and interest on reserves equals IOR = 1 percent. The Fed conducts an open market sale of $10 billion. As a result, the equilibrium fed funds rate will equal: 5.50% 5.00% 4.50% 4.00% 3.50% 3.00% 2.50% 2.00% 1.50% 1.00% Federal Funds Rate (FFR) 0.50% 0.00% $0 $10 $20 $30 $40 $50 $60 $70 $80 $90 $100 $110 $120 $130 $140 Bank Excess Reserves ($Billion) O a. FFR = 2.00% O b. FFR = 1.50% O c. FFR = 1.00% Q d. FFR = 0.50% 0 e. None of the above. Question 21 1 pts The following graph shows a hypothetical demand function for federal funds. Currently, the total amount of reserves in the banking system is $80 billion, the discount rate is 3.5 percent, and interest on reserves equals IOR = 1 percent. The Fed wants to reduce the equilibrium fed funds rate to 0.50 percent to stimulate the economy. Which of the following actions will accomplish this goal? 5.50% 5.00% 4.50% 4.00% FFR) ( s 3 3 3.00% 2.50% 2.00% 1.50% Federal Funds Rate 1.00% 0.50% 0.00% $0 $10 $20 $30 $40 $50 $60 $70 $80 $90 $100 $110 $120 $130 $140 Bank Excess Reserves ($Billion) O a. Reduce the interest on reserves to 0.50 percent. 0 b. Conduct an open market purchase of $10 billion. 0 c. Conduct an open market purchase of $20 billion. 0 d. Reduce the interest on reserves to 0.50 percent and at the same time conduct an open market purchase of $10 billion. 0 e. None of the above