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A discussion of the rates set by the Federal Reserve

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Explain which of these interest rates the Federal Reserve sets:

a) The discount rate
b) The federal funds rate
c) The prime rate

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Solution Summary

This piece explores the discount rate, the federal funds rate, and the prime rate and how they are adjusted by the Federal Reserve.

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The federal reserve actively maintains three lending opportunities to eligible institutions called the discount window. The federal reserve uses the discount rate to control the demand of primary credit by financial and lending institutions who need to borrow money from the federal reserve. The secondary ...

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