Let’s pretend in its effort to control inflation, the Federal Reserve raises the federal funds target to a jaw-dropping 13%. This has caused a ripple effect on all other interest rates in the economy, including saving deposit rates. JPMorgan Chase offers an APR of 15% that is compounded daily, Bank of America offers an APR of 15.5% that is compounded quarterly, and Wells Fargo offers an APR of 16% that is compounded annually. If you are a saver, which bank is offering the most attractive deposit rate?
Functions of the Federal Reserve System
The Federal Reserve System looks after the financial activities and operations of the banking system. It is the apex body that has complete control over the banking regulations. All the guidelines regarding the banking system, money supply, and formulation of the monetary policy come under the purview of the Federal Reserve System. The New York Fed also helps in drafting the monetary policy and supervising the financial system.
Elastic and Inelastic Markets
Measuring the change in percentage of an economic variable with respect to change in a different economic variable is known as elasticity. This change in percentage results in a change in price concerning changes in other factors. In simple terms, when one factor brings a change to another factor, it is called elasticity.
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