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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 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 are the three tools the Fed uses to keep the economy stable?
Open market operations, discount rates, and reserve requirements.
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
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.
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 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 are the three tools the Fed uses to keep the economy stable?
Open market operations, discount rates, and reserve requirements.
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.
How can the Fed decrease the money supply?
The Federal Reserve can decrease the money supply by selling government securities, increasing the reserve requirements for banks, or raising the discount rate.
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.
Which is not a way that the fed can generate an increase in the money supply?
One way the Federal Reserve (the Fed) cannot generate an increase in the money supply is through raising interest rates. Higher interest rates discourage borrowing and spending, which can lead to a contraction in the money supply. Instead, the Fed typically increases the money supply through measures such as lowering interest rates, purchasing government securities, or decreasing reserve requirements for banks.
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.
