Question

compare and contrast the federal funds rate the discount rate and the prime rate in 2-3 sentences

Answer 1

The federal funds rate is the interest rate at which banks lend to each other overnight, primarily influencing monetary policy and economic activity. The discount rate is the interest rate charged by the Federal Reserve to commercial banks for short-term loans, serving as a tool for monetary policy that can affect the money supply. In contrast, the prime rate is the interest rate that commercial banks charge their most creditworthy customers, usually exceeding the federal funds rate and reflecting the cost of borrowing for consumers and businesses.