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FILL IN THE BLANK. if the federal reserve increases the spread between the federal funds rate and the discount rate, then the cost of a shortage of reserves ___ and the amount banks are willing to lend ___ .

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tutorconsortium123

f the federal reserve increases the spread between the federal funds rate and the discount rate, then the cost of a shortage of reserves Increasesand the amount banks are willing to lend Degreases..

What happens when the Federal Reserve raises the federal funds rate?

  • Your credit card debt is more costly when the Fed raises interest rates. This is due to the fact that interest rates on consumer debt, such as credit card balances, frequently follow changes in the federal funds rate.
  • When it comes to the Fed boosting interest rates, there is some good news: savings and other accounts earn higher interest. Deposit rates are at levels that haven't been seen in more than ten years, claims Ken. As the Fed keeps raising rates, further deposit rate hikes are anticipated.
  • When it wants other interest rates to rise, the Fed will increase the discount rate. Central banks adopt this technique, known as contractionary monetary policy, to lower inflation.

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tutorconsortium125

If the federal reserve increases the spread between the federal funds rate and the discount rate, then the cost of a shortage of reserves Increases and the amount banks are willing to lend Decreases.

What is Federal reserve ?

  • The Federal Reserve System is the United States of America's central banking system. The Federal Reserve Act was enacted on December 23, 1913, in response to a series of financial panics that led to a desire for central control of the monetary system in order to alleviate financial crises.
  • Monetary policy in the United States consists of the Federal Reserve's actions and communications to promote maximum employment, stable prices, and moderate long-term interest rates—the economic goals mandated by Congress.
  • In the Federal Reserve Act, Congress established three key monetary policy objectives: maximising employment, stabilising prices, and moderating long-term interest rates. The first two goals are referred to as the Federal Reserve's dual mandate.

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