Supposed that the demand for federal funds curve is such that the quantity of funds demanded changes by $140 billion 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 supposed that the fed retargets the rate to 3.5 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 equilibrium to occur at the new target rate? (input amount as a positive value)