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What describes the most likely effect of the Fed lowering the discount rates on overnight loans?
An increase in the money supply
What are the three ways the fed can increase money supply?
Open market operations ( purchasing bonds), Discount rates ( lowering the interest rates) and Reserve requirement.
What are the three tools the Fed uses to keep the economy stable?
Open market operations, discount rates, and reserve requirements.
What best explains why raising the discount rate affects the money supply?
When the discount rate is high, banks keep more reserves on hand to avoid paying a lot to borrow from the Fed... Apex :)When the discount rate is high, banks keep more reserves on hand to avoid paying a lot to borrow from the Fed.
What is the Fed's oldest policy tool?
The Federal Reserve does not have one tool that is more important over another when it comes to monetary policy. There are three tools and all three are equally important. The three tools are open market operations, discount rates, and reserve requirements.
What describes the most likely effect of the Fed lowering the discount rates on overnight loans?
An increase in the money supply
How are small business loan rates affected by the Fed discount rate?
All loan rates are effected by the federal rate. if the federal rate increases then all loan rates will do likewise.
What are the three ways the fed can increase money supply?
Open market operations ( purchasing bonds), Discount rates ( lowering the interest rates) and Reserve requirement.
What are the three tools the Fed uses to keep the economy stable?
Open market operations, discount rates, and reserve requirements.
What best explains why raising the discount rate affects the money supply?
When the discount rate is high, banks keep more reserves on hand to avoid paying a lot to borrow from the Fed... Apex :)When the discount rate is high, banks keep more reserves on hand to avoid paying a lot to borrow from the Fed.
What effect would take place from the Fed raising the discount rate from 5 percent to 10 percent?
An additional discount of 5% which means paying 90% of the original price instead of 95% of the original price.
What is the Fed's oldest policy tool?
The Federal Reserve does not have one tool that is more important over another when it comes to monetary policy. There are three tools and all three are equally important. The three tools are open market operations, discount rates, and reserve requirements.
What impact does the Fed's raising the prime a 1/4 point have on small business loan rates?
Technically speaking, the Fed does not set the prime rate--they set the Fed Funds rate, and the banks that set their own prime rates (which is then reported in the Wall Street Journal) vary those rates to match the Fed Funds rate. That being said, many small business loans are based on the Prime Rate plus a spread, so if Prime goes up 1/4 point, the loan rate will go up 1/4 point. When the fed raises interest rates this has an effect on rates throughout the country. This includes even small business loan rates.
What happens when federal reserve raises interest rates?
If the Federal Reserve Bank of New York plans on raising interest rates at some point in the near future it will change the "fed funds" rate on overnight bank loans.
How does the Fed lower interest rates?
In reality, the Fed does not lower interest rates. It lowers the rate charged to banks to borrow money. This usually results in a lowering of commercial rates.
What type of policy should the federal reserve use to countract a rapid expansion that is causing high inflation?
If the economy is experiencing a rapid expansion that may cause high inflation, the fed may introduce a tight money policy, That is, it will reduce the money supply. The fed reduces the montey supply to push interest rates upward. By raising interest rates, the Fed causes investment spending to decline. This brings real GDP down, too.
Which type of policy is controlled by the Board of Governors of the Federal Reserve?
Well, if by "the federal reserve", you mean the federal reserve bank, then there are two types of policies. These are expansionary and contractionary monetary policies. In times of recession, The FED uses expansionary policies such as increasing the money supply by buying bonds, lowering the discount rate, and lowering reserve requirements.In times of over expansion, The FED uses contractionary policies such as decreasing the money supply by selling bonds, raising the discount rate, and raising reserve requirements.
