The demand curve becomes flat if iff falls below ior. Explain why. Suppose the current equilibrium federal funds rate is equal to ior. How would you raise the federal funds rate above ior? Explain using the diagram. Assume that the FRB maintains the current level of ior: (10 points) Derive AM as a function of AB, k, r and x. Suppose the central bank determines AB = 100 given k = r = x = 10%. Calculate AM . If you want to make AM, 10% more than that you calculated, how would you change r? (10 points) 1 The demand curve becomes flat if iff falls below ior. Explain why. Suppose the current equilibrium federal funds rate is equal to ior. How would you raise the federal funds rate above ior? Explain using the diagram. Assume that the FRB maintains the current level of ior: (10 points) Derive AM as a function of AB, k, r and x. Suppose the central bank determines AB = 100 given k = r = x = 10%. Calculate AM . If you want to make AM, 10% more than that you calculated, how would you change r? (10 points) 1