"basis point" is one one-hundredth of a percentage point. if an interest rate increases by 50 basis points, it has gone up by one-half of a percentage point. "monetary aggregates" are measures of the money supply, such as m1 and m2. a federal reserve publication from february 2002 made the following observation: "as the economy slipped into recession last year, the fmoc reduced its target level for the overnight federal funds rate by 475 basis points to 1.75 present. also, during the year, growth of the monetary aggregates jumped sharply."
a. if the target for the federal funds rate was reduced by 475 basis points, to 1.75 percent what was its original level?
b. is there a connection between the federal funds rate falling and the money supply increasing? explain.