ALSO, what are the structure and tools of the Federal Reserve and does anybody know where I can find current interest rates (including federal funds, discount, and prime rates). I have heard a lot about these rates but what the heck are they used for? What factors would cause a trend? BEST ANSWER FOR A QUESTION THAT PROVIDES AN ANSWER TO MOST OF THOSE QUESTIONS.
2007-01-07 16:44:46 · 5 answers · asked by Anonymous in Social Science ➔ Other - Social Science
thanks economicsguys--your answer is good and i will most likely select it as best answer when i can
2007-01-07 17:02:51 · update #1
The Fed tightens and loosens the money supply in order to keep inflation in check, especially under the new Fed chief Ben Bernanke. The decision is handled by the FOMC (Federal Open Market Committee) and is usually done through open market operations. This process changes the Federal Funds Rate. In order to effect this change, a call is made to the New York Federal Reserve, and US Treasury bonds are bought to lower the rate (loosening the supply) or sold to increase the rate (tightening the supply). The Fed can also change the discount rate to effect monetary policy, or change the reserve requirement for banks. However, these two options are rarely used.
Currently, the federal funds rate is 5.25%, and prime is always 3% above this, so it is currently 8.25%. Generally, if inflation is rampant, you will see these rates trending upward, and they will be lowered to stimulate the economy. The discount rate is not as widely publicized.
2007-01-07 16:52:45 · answer #1 · answered by theeconomicsguy 5 · 1⤊ 0⤋
In the U.S., the money supply can be controlled by the Federal Government by printing more money. The Federal Reserve can indirectly control the money supply by changing the discount rate. I don't know about other countries. Good luck, Dana (B.A. Economics)
2016-03-14 02:55:37 · answer #2 · answered by Anonymous · 0⤊ 0⤋
The fed controls the money supply by changing the supply and demand of money via the interest rates. The Interest rates are the cost of money.
2007-01-07 16:49:12 · answer #3 · answered by dredma1 2 · 0⤊ 0⤋
Rate changes
http://www.federalreserve.gov/fomc/fundsrate.htm
and how the ripple effect works
http://www.bankrate.com/brm/news/fed/fedchart.asp
2007-01-07 16:54:43 · answer #4 · answered by kate 7 · 0⤊ 0⤋
why answer when I can point you to the straight dope...yeah, it doesn't answer all your questions, but maybe it'll answer some.
2007-01-07 16:54:11 · answer #5 · answered by Jacob P 2 · 0⤊ 0⤋
lol nice -about my rape question...and i see that u asked that guy if he did nut on a girls head, so im writtin you in one of your questions....but anyways your funny :*
2007-01-07 17:46:52 · answer #6 · answered by Tasha from Ca 1 · 0⤊ 0⤋