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Fed Funds and Discount Rate Cuts

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The Federal Reserve cut the Fed Funds Rate and the Discount Rate today. What are these rates and will they spur the economy?

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Solution Summary

The solution describes what the Fed Funds Rate and Discount Rate are and how cutting them effects the economy.

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The Fed Funds Rate is the rate at which funds may be borrowed from one bank to another. The discount rate is the interest rate at which a bank borrows funds directly from the Reserve.

The Federal Reserve mandates that banks and other lending institutions keep a certain level of cash in their Federal Reserve ...

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