Bre Kelley chapter 10 question 6

The Federal Open Market Committee consists of the Fed chairman and presidents from the Reserve Banks.  If the FOMC wants to stimulate the economy of borrowing, it has two tools.  Discount rate is the interest rate at which commercial banks can borrow funds directly from the Federal Reserve.  That relationship between discount rate and borrowing includes if the rate falls than they can borrow more cheaply but than customers fear the bank was not able to raise the funds on their own.  The second tool is the Federal Funds rate.  If the supply of funds goes up, than banks have to lower their interest rates.  This than brings us to the debate of the Federal Reserve creating new money.