The expansionary fiscal policy …show more content…
Bank reserves are what the Fed’s use to fund Treasury securities, then in turn leads to a raise in the overall quantity of reserves that the bank keeps. Banks are often loan the excess reserves at a reduced rate, which then increases the banks currency supply (Amacher & Pate, 2012). Then the Feds give a discounted or reduced amount that would be close to the interest amount credited to commercial banks for reserve loans (Carol, 2013). The Federal security system was designed to help out commercial banks on the verge of bankruptcy by giving them the reserve loans. The Federal Reserve Banks decide the discounted rates for these type of loans and then they have to be approved by the Board of Governors. Differences with the discount rates are equivalent to additional monetary policy activity in practice (Weil,