The following graph shows a hypothetical demand function for federal funds . Currently , the total amount of reserves in the banking system is $ 50 billion , the discount rate is 3.5 percent , and interest on reserves equals IOR = 1 percent . If the Fed reduces the discount rate to 3.00 percent , the equilibrium federal funds rate ( FFR ) will equal :   O a . FFR 3.00%   O b . FFR = 2.50%   O c . FFR = 2.00%   O d . FFR 1.50% O e . None of the above.

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