9. 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 occasionally borrow from the Federal Reserve when they find themselves short on reserves. A lower discount rate v banks' incentives to borrow reserves from the Federal Reserve, thereby 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 banks' need to borrow from each other , and the federal funds rate
9. 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 occasionally borrow from the Federal Reserve when they find themselves short on reserves. A lower discount rate v banks' incentives to borrow reserves from the Federal Reserve, thereby 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 banks' need to borrow from each other , and the federal funds rate
Brief Principles of Macroeconomics (MindTap Course List)
8th Edition
ISBN:9781337091985
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter11: The Monetary System
Section: Chapter Questions
Problem 9PA
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Transcribed Image Text:9. 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 occasionally borrow from the Federal Reserve when
they find themselves short on reserves. A lower discount rate
banks' incentives to borrow reserves from the Federal Reserve,
thereby
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
banks' need to borrow from each
other
and the federal funds rate
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In the banking system, different types of interest rates are imposed by the central bank from different parties.
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