How Does Lowering the Discount Rate Enable the Fed to Stimulate

question 9

Essay

How does lowering the discount rate enable the Fed to stimulate the economy? How does raising the discount rate enable the Fed to control too robust an economy?

---

Definitions:

Oversensitivity

An exaggerated response in emotion or feeling to external stimuli or situations, often leading to discomfort.

Illness Anxiety Disorder

A psychiatric disorder characterized by excessive worry about having a serious, undiagnosed medical illness, despite few or no medical symptoms.

Bodily Symptoms

Physical signs or complaints reported by an individual, which can be manifestations of psychological distress or physical illness.

Psychophysiological Disorder

A condition in which psychological stress adversely affects physiological functioning, leading to physical symptoms.