Since 2002, the Fed Has Set the Primary Discount Rate

question 93

Essay

 Since 2002, the Fed has set the primary discount rate above the IOER rate. Why is this likely to prevent the spikes in the market federal funds similar to the ones that occurred in previous years? 

---

Definitions:

Barriers to Entry

Factors that prevent or hinder companies from entering a specific market, such as high startup costs or stringent regulations.

Profit-Maximizing

a strategy or process where a firm determines the price, output level, and production scale that lead to the highest possible profit, under certain market conditions.

Profit

The profit achieved when the revenue from business operations surpasses the combined total of expenses, costs, and taxes needed to maintain those operations.

Loss

Loss refers to the negative financial result that occurs when expenses exceed revenues or costs outweigh benefits in a transaction or operation.