A. According to the definition of the basis point, 1 basis point = 0.01%, then 475 basis points are equal to 4.75%. So the original level - 4.75%=1.75%, the original level is apparently 6.50 percent.
B. the falling federal funds rate means the banks need to pay less, when they borrow money for FED. Therefore, they will lend more money to public to get interests. They are not afraid of lacking money in their own reserve, because they can borrow money from FED with a relatively low price. So there will be more money taking out of the financial system into the market, resulting in more monetary aggregates, thus increasing the money supply.
Hope my answer will be helpful!
标签：federal,funds,rate
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