When the federal funds rate equals the discount rate quizlet
The discount rate, by contrast, is the interest rate charged by the Federal Reserve for discount loans. As such, it is not market determined, but rather set by the Federal Reserve. We will discuss these interest rates in more detail in future modules. Self Check: Federal Funds, Prime and Discount Interest Rates The Fed targeted the overnight fed funds rate within a "channel," with the discount rate as the upper bound on the channel and the interest rate on reserves as the lower bound on the channel. For example, in January 2007, the discount rate was set at 6.25 percent, the fed funds rate was targeted at 5.25 percent and the interest rate on reserves The Federal Reserve discount rate is how much the U.S. central bank charges its member banks to borrow from its discount window to maintain the reserve it requires. The Federal Reserve Board of Governors lowered the rate to 0.25% on March 16, 2020. This move was in response to the COVID-19 coronavirus outbreak A) above the target federal funds rate. B) equal to the target federal funds rate. C) below the target federal funds rate. D) equal to zero. Answer: A Ques Status: Revised 29) Everything else held constant, the vertical section of the supply curve of reserves is shortened when the A) discount rate increases.
The Fed targeted the overnight fed funds rate within a "channel," with the discount rate as the upper bound on the channel and the interest rate on reserves as the lower bound on the channel. For example, in January 2007, the discount rate was set at 6.25 percent, the fed funds rate was targeted at 5.25 percent and the interest rate on reserves
31) Suppose on any given day the prevailing equilibrium federal funds rate is above the Federal Reserve's federal funds target rate. If the Federal Reserve wishes for the federal funds rate to be at their target level, then the appropriate action for the Federal Reserve to take is a _____ open market _____, everything else held constant. The Federal Reserve doesn’t actually set the federal funds rate, but rather sets a “target rate” and works to keep it in a given range by buying or selling government bonds. The Fed uses the federal funds rate to control the supply of available funds, essentially controlling inflation. Federal Funds Rate: The federal funds rate is the rate at which depository institutions (banks) lend reserve balances to other banks on an overnight basis. Reserves are excess balances held at the The federal funds rate is the interest rate banks charge each other on loans used to meet reserve requirements. The federal funds rate is often confused with the discount rate, which is the interest rate the Federal Reserve charges on loans directly from the Federal Reserve Bank. But they are not the same. The interest rate on these loans is set at a higher penalty rate to reflect the less-sound condition of these borrowers. Under normal circumstances, the discount rate sits in between the Fed Funds rate and the secondary credit rate. Example: Fed funds rate = 1%; discount rate = 2%, secondary rate = 2.5%.
A) above the target federal funds rate. B) equal to the target federal funds rate. C) below the target federal funds rate. D) equal to zero. Answer: A Ques Status: Revised 29) Everything else held constant, the vertical section of the supply curve of reserves is shortened when the A) discount rate increases.
The Federal Reserve can use four tools to achieve its monetary policy goals: discount rate, reserve requirements, open market operations and interest on 31) Everything else held constant, in the market for reserves, increases in the discount rate affect the federal funds rate A) when the funds rate is below the discount rate. B) when the funds rate equals the discount rate. C) when the demand for federal funds intersects the vertical section of the reserve supply curve.
The federal funds rate is the interest rate banks charge each other on loans used to meet reserve requirements. The federal funds rate is often confused with the discount rate, which is the interest rate the Federal Reserve charges on loans directly from the Federal Reserve Bank. But they are not the same.
3 days ago The federal funds rate is the target interest rate set by the Fed at which The discount rate refers to the interest rate the Fed charges banks that The Federal Reserve can use four tools to achieve its monetary policy goals: discount rate, reserve requirements, open market operations and interest on
Everything else held constant, in the market for reserves, increases in the discount rate affect the federal funds rate A) when the funds rate is below the discount rate. B) when the funds rate equals the discount rate. C) when the demand for federal funds intersects the vertical section of the reserve supply curve.
31) Everything else held constant, in the market for reserves, increases in the discount rate affect the federal funds rate A) when the funds rate is below the discount rate. B) when the funds rate equals the discount rate. C) when the demand for federal funds intersects the vertical section of the reserve supply curve. Everything else held constant, in the market for reserves, increases in the discount rate affect the federal funds rate A) when the funds rate is below the discount rate. B) when the funds rate equals the discount rate. C) when the demand for federal funds intersects the vertical section of the reserve supply curve. Everything else held constant, in the market for reserves, increases in the discount rate affect the federal funds rate A) when the funds rate is below the discount rate. B) when the funds rate equals the discount rate. C) when the demand for federal funds intersects the vertical section of the reserve supply curve.
The interest rate on these loans is set at a higher penalty rate to reflect the less-sound condition of these borrowers. Under normal circumstances, the discount rate sits in between the Fed Funds rate and the secondary credit rate. Example: Fed funds rate = 1%; discount rate = 2%, secondary rate = 2.5%. The Fed can raise or lower the discount rate to influence the federal funds effective rate rate. For example, if the economy needs to be stimulated, it may lower the discount rate. If banks can borrow money from the Fed at a lower rate, this encourages them to lower the rates offered to their customers. Lastly, B) raises the federal funds rate. C) has no effect on the federal funds rate. D) has an indeterminate effect on the federal funds rate. Answer: B 9. Everything else held constant, in the market for reserves, when the federal funds rate equals the discount rate, lowering the discount rate A) increases the federal funds rate. The discount rate is different from the Federal Funds or overnight lending rate. The DISCOUNT RATE is the rate charged to commercial banks and other depository institutions on loans that they receive from the Fed . The FED FUNDS RATE is the rate that banks charge each other for loans.