0/1 pts Question 7 7.0% 6.5% 6.0% 5.5% 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% $0 $10 $20 $30 $40 $50 $60

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0 1 Pts Question 7 7 0 6 5 6 0 5 5 5 0 4 5 4 0 3 5 3 0 2 5 2 0 1 5 1 0 0 5 0 0 0 10 20 30 40 50 60 1 (153.24 KiB) Viewed 18 times

0/1 pts Question 7 7.0% 6.5% 6.0% 5.5% 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% $0 $10 $20 $30 $40 $50 $60 $70 $80 $90 $100 $110 $120 $130 $140 $150 $160 Bank Excess Reserves ($Billion) Here is another realistic scenario. Consider the above graph that shows demand for excess reserves by the banking system as a whole. The discount rate is 4.5 percent and the Fed pays an interest of 1.50 percent on excess reserves. Currently banks as a whole are holding $110 billion of reserves. If demand for reserves decreases by $20 billion, the equilibrium fed funds rate will equal 5.00 percent. Answer 1: 5.00 Federal Funds Rate