Question: 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

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
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