The FOMC decided today to lower its target for the federal funds rate by 75 basis points to 3.5%. The Board of Governors, also, unanimously approved a 75 basis point decrease in the discount rate to 4%.

a) What was the initial federal funds rate and discount rate before the announcement?

• Federal funds rate [ Select ] ["4.25"] %
• Discount rate [ Select ] ["4.75"] %

b) Given that reserves are scarce, what is impact of using an OMO to increase the federal funds rate to 4.25%?

• Type OMO [ Select ] ["Open market purchase", "Open market sale"]
• Demand for reserves [ Select ] ["shifts left", "remains unchanged", "shifts right"]
• Supply of Reserves [ Select ] ["shifts right", "remains unchanged", "shifts left"]

c) What is impact of increasing the discount rate to 5.25%?

• Demand for reserves [ Select ] ["shifts left", "shifts right", "remains unchanged"]
• Supply of Reserves [ Select ] ["horizontal portion shifts down", "horizontal portion remains unchanged", "horizontal portion shifts up"]