Consider the above graph that shows demand for excess reserves by the banking system as a whole. The discount rate is 4.5 percent and the Fed pays an interest of 1.50 percent on excess reserves. Currently banks as a whole are holding an excess reserve of $70 billion. This means that the equilibrium fed funds rate is percent. The Fed increases the supply of excess reserves by $20 billion through an open market purchase of bonds. As a result, the equilibrium fed funds changes to percent. The Fed increases the supply of excess reserves by another $30 billion through another round of an open market purchase. As a result the equilibrium fed funds rate changes to percent