Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

need help on this problem The discount rate is the interest rate on loans that the Federal Reserve makes to ban ks. Banks occasionally borrow

need help on this problem

image text in transcribed
The discount rate is the interest rate on loans that the Federal Reserve makes to ban ks. Banks occasionally borrow from the Federal Reserve when they nd themselves short on reserves. A higher discount rate V banks' incentives to borrow reserves from the Federal Reserve, thereby V the quantity of reserves in the banking system and causing the money supply to V . The federal funds rate is the interest rate that ban k5 charge one another for short-term (typically overnight) loans. When the Federal Reserve uses open-market operations to sell government bondsl the quantity of reserves in the banking system 7 , hanks' need to borrow from each other V , and the federal funds rate V

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

The Commanding Heights The Battle For The World Economy

Authors: Daniel Yergin, Joseph Stanislaw

1st Edition

068483569X, 9780684835693

More Books

Students also viewed these Economics questions