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HOMOGENEOUS OF DEGREE ONE: A property of an equation the exists if independent variables are increased by a constant value, then the dependent variable is increased by the same value. In other words, if the independent variables are doubled, then the dependent variable is also doubled. This property often surfaces in the analysis of production functions. A production function homogeneous of degree one is said to have constant returns to scale.

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Lesson 20: Federal Reserve System | Unit 4: Monetary Policy Page: 15 of 20

Topic: Discount Rate <=PAGE BACK | PAGE NEXT=>

The discount rate is the interest rate the Fed charges for reserve loans to commercial banks.
  • The Federal Funds rate is for loans between commercial banks.
  • The discount rate is for loans from the Fed to commercial banks.
  • Banks borrow from the Fed when the need reserves to stay in business. The price they pay is the discount rate.

Why don't troubled banks use the Federal Funds Market?

  • Other banks are probably reluctant to extend a loan.
  • The entire banking system might be short of reserves.
  • The discount rate is typically lower than the federal funds rate.

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AGGREGATE DEMAND

The total real expenditures on final goods and services produced in the domestic economy that buyers are willing and able to undertake at different price levels, during a given time period (usually a year). Aggregate demand, usually abbreviated AD, is an inverse relation between price level and aggregate expenditures. This is one half of the AS-AD (aggregate market) analysis. The other half is aggregate supply. Aggregate demand consists of four aggregate expenditures--consumption expenditures, investment expenditures, government purchases, and net exports--made by the four macroeconomic sectors--household, business, government, and foreign.

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YELLOW CHIPPEROON
[What's This?]

Today, you are likely to spend a great deal of time at an auction trying to buy either a package of 3 by 5 index cards, the ones without lines or a blue mechanical pencil. Be on the lookout for mail order catalogs with hidden messages.
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A lump of pure gold the size of a matchbox can be flattened into a sheet the size of a tennis court!
"The roots of education are bitter, but the fruit is sweet."

-- Aristotle, philosopher

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