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THIRD ESTATE: In past centuries, this included the peasants, serfs, or slaves who performed the dirty deeds for the ruling elite. In modern times, this is the workers, taxpayers, and consumers who have limited ownership of and control over resources usually nothing more than their own labor. The third estate, which forms the backbone of any modern economy, is usually at odds with the business leaders of the second estate. Help may come from the government leaders of the first estate or the journalist of the fourth estate--but don't count on it.

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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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INVESTMENT BORROWING

The acquisition of funds through the financial markets by the business sector which are used to finance investment expenditures on capital goods. In terms of the simple circular flow model, this is one of two basic demands for household saving diverted into financial markets. The other is government borrowing.

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YELLOW CHIPPEROON
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Today, you are likely to spend a great deal of time strolling through a department store trying to buy either car battery jumper cables or a dozen high trajectory optic orange golf balls. Be on the lookout for door-to-door salesmen.
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In the Middle Ages, pepper was used for bartering, and it was often more valuable and stable in value than gold.
"Inside the ring or out, ain't nothing wrong with going down. It's staying down that's wrong. "

-- Muhammad Ali

ECU
European Currency Unit
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