Question

Describe without looking for definitions from internet.

(a) Federal Funds Rate
(b) Discount Rate
(c) Prime Rate
(d) Excess Reserves
(e) What does M1 consist of
(f) Tell me about the FDIC as much as you can

Answer 1

1.

I will give you the definitions and meaning in the most simple way

A. The federal funds rate is the interest rate that is charged by one commercial bank to other commercial banks on an overnight basis

It is not directly controlled by the Federal reserve banking and can be decided by the commercial banks

B.The discount rate is the interest rate that is charged by the central bank of the United States that is Federal reserve to the commercial banks

D. Reserves consist of two parts that are required reserve and excess reserves

The required reserve is the amount of money that the bank has to maintain and it cannot be lended and rest of the money that is excess reserves are available for lending to the people and the businesses

E. M1 is a money type which is the simplest form of money

It can be easily liquidated

It includes traveler's check, checkable deposits, currency, coins, etc

C If we talk about prime rate then it is the interest rate that is charged by the commercial banks to the those corporate customers who are full creditworthy

Federal fund serves as the overnight rate that basis for the prime rate

It is generally given to the large corporations

F.FDIC that is Federal deposit insurance corporations is the deposit agency in United State banks that comes in the picture when there is an event of bank failures

It was created in 1833 to encourage the stability and liquidity of money in the financial system in the time when the emergency need arises