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→Discount rate
===Discount rate===
===Discount rate===
The discount or federal funds rate is the interest rate the federal reserve charges member banks for overnight lending. All federal and state chartered banks must meet their reserve requirement on a daily basis. At the end of a business day, some banks exceed their requirement while others fall short. So banks make overnight loans to each other ("interbank lending") at the federal funds rate, set by the Federal Reserve Board in its Open Market Meetings. However, job creation and [[economic growth]] will lead to a shortfall of money in circulation to meet new payrolls. As the amount of money in circulation to meet reserve requirements dries up, the Federal Reserve steps as the lender of last resort to supply new banking reserves to the network, i.e. expand the money supply. If the amount of reserves supplied to the network is excessive, the result is more money in circulation than necessary and [[inflation]].
The discount or federal funds rate is the interest rate the federal reserve charges member banks for overnight lending. All federal and state chartered banks must meet their reserve requirement on a daily basis. At the end of a business day, some banks exceed their requirement while others fall short. So banks make overnight loans to each other ("interbank lending") at the federal funds rate, set by the Federal Reserve Board in its Open Market Meetings. However, job creation and [[economic growth]] will lead to a shortfall of money in circulation to meet new payrolls. As the amount of money in circulation to meet reserve requirements dries up, the Federal Reserve steps as the lender of last resort to supply new banking reserves to the network, i.e. expand the money supply. If the amount of reserves supplied to the network is excessive, the result is more money in circulation than necessary and [[inflation]].
===Open Market Operations===
==Criticism==
==Criticism==