Federal Reserve Money Train Activity Assignment Example | Topics and Well Written Essays - 500 words

Federal Reserve Money Train Activity - Assignment Example The discount rate has its many affects on the economy. The discount rate will determine if the Federal Reserve is going to allow banks to lend at higher or lower rates. Deciding to raise the discount rate will increase overall lending rates and slow down the rate at which consumers are buying. If fewer loans are taken out it is likely that spending is also less. This is important to slow economic growth to prevent inflation, low unemployment rates and too high of a GDP. Discount rates are truly a large participator when it comes to the government’s role of increasing or decreasing economy growth. Open market operations affect the economy as they control whether or not bonds are to be made more or less available. The purchasing of bonds will allow for less money for the government. Selling bonds will allow for more money for the government. Deciding to sell bonds will allow for an increase in economic growth as it will allow more available in the economy. Buying bonds will minimize what is in the economy and cause the economy to shrink. The use of open market operations depends on the size the economy needs to be in order to be successful and grow at the appropriate