Monetary Institutions 15 | Back to Attempts Keep the Highest: /2 11. The discoun

Question

Monetary Institutions 15 | Back to Attempts Keep the Highest: /2 11. The discount rate and the federal funds rate The discount rate is the interest rate on loans that the Federal Reserve makes to banks. Banks they find themselves short on reserves. A lower discount rate thereb occasionally borrow from the Federal Reserve when banks' incentives to borrow reserves from the Federal Reserve, y the quantity of reserves in the banking system and causing the money supply to The federal funds rate is the interest rate that banks charge one another for short-term (typically overnight) loans. When the Federal Reserve uses open-market operations to sell government bonds, the quantity of reserves in the banking system reserves and the federal funds rate of Use Privacy NoticeSecurity Notice Accessibility Copyright NoticesTerms

Explanation / Answer

1) Increases

When discount rate decreases then it becomes less expensive for banks to borrow money from the Fed. So, they borrow more money and lend it out as loans.

2) Increases

3) Increase

4) Falls

Selling of government securities take out money from the economy and leads to decrease in money supply.

5) Rises

6) Increases

Related Questions

Navigate

• Browse (All)
• Browse M
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.