Question: Suppose now that I=50-5*r, where r is the rate of interest. Initially r=8.

a. What can the Bank of Florin do (its tools are essentially the same as the Fed’s) to interest rates if it wants to increase GDP by 100? (Note: you don’t have to re-solve for equilibrium to answer this question.)

b. What would the Bank of Florin have to do get the interest rate to change in this way?