ECO 372 Week 3 Discussion Question 4 - 90397

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Rank the factors that contribute to the discount interest rate from most important to least important. Justify your rankings. The discount rate-is the rate of interest the fed charge for loans it makes to banks. The the federal funds loans of excess reserves banks make to one another. It encourages the banks to borrow and increases the money supply. That demand for and supply influences the federal funds rate and, ultimately, employment, output, and prices, (Colander, 2010) 1. Buying and selling treasury securities, which changes the reserve requirement 2. the reserve requirement affects the rate, through The Fed targets an interest rate; the money multiplier determines the amount of reserves needed to achieve that rate. Reserves and the money supply are mutually determined. Changing the reserve requirement changes the money supply. Increase the reserve requirement, decrease the money supply and vice versa 3. open market operations, because the market equilibrates at the target interest rate 4.demand 5.quantitative easing tools...
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Rank the factors that contribute to the discount interest rate from most important to least important. Justify your rankings.

The discount rate-is the rate of interest the fed charge for loans it makes

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