Federal Reserve Rate

   what are the factors that would influence the Federal Reserve in adjusting the discount rate?

        How does the discount rate affect the decisions of banks in setting their specific interest rates?

        How does monetary policy aim to avoid inflation?

        How does monetary policy control the money supply?

        How does a stimulus program (through the money multiplier) affect the money supply?

        Currently, what indictors are evident that there is too much or too little money within the economy? How is monetary policy aiming to adjust this?

What are the factors that would influence the Federal Reserve in adjusting the discount rate?

The Federal Reserve cannot have control of inflation or impact employment and output directly. These three tools indirectly affect accomplishing the Feds goals:

Reserve requirements

Discount rates

Open market operations

These three tools help the Federal Reserve influence supply and demand intended for reserve balances which in turn eventually changes the federal fund rates.

. The Federal discount rate is the interest rate a financial institution borrows funds directly from the Federal Reserve Bank. The banks that have low reserves that go under the reserve requirement which are set by the Federal Reserve’s board of governors use this money in order to correct their shortage. The board of directors of each bank sets new discount rates every 2 weeks or 14 days.

Feds use discount rates to control and manage the supply of funds that are available; this process eventually influences interest rates and inflation. When there is more money accessible, inflation will most likely occur.

How does the discount rate affect the decisions of banks in setting their specific interest rates?

Rate spread is defined as how other lenders and banks make profit. Banks and other lenders purchase currency at the lowest rate possible and then begin to lend out that same money with a higher rate.

Banks...