Question

If the federal funds market is at equilibrium at point B and the Federal Reserve decides to change the rate by a percentage point in order to reduce the chances of the economy going into recession, the supply of funds curve will have to shift to _____.

Answer 1

a. Sf1

Step-by-step explanation:

If you reduce the rate by one percentage point, it falls from 5.0 to 4.0, moving the equilibrium point along the supply curve of funds, so that the new equilibrium point will be at D (Sf1).