1.Define the federal funds rate and compare it to the discount rate. Which is lower? Why?

Commercial banks must hold reserves with the Federal Reserve Bank. Those banks that hold more reserves than required are said to have excess reserves. These banks may use the excess reserves to loan to other banks that need reserves to meet their reserve requirements. The rate charged by banks for loaning out these excess reserves is the federal funds rate. These loans are normally short-term, overnight loans. This rate is generally higher than the Fed's discount rate, which is the rate that the Fed would charge member banks for reserve loans. The discount rate is lower, which might seem more advantageous to a bank needing reserves, but too many visits to the Fed's discount window could trigger an investigation into bank practices. Thus, banks would rather pay the higher rate and borrow from one another.

2.Visit http://www.federalreserve.gov/Fomc/BeigeBook/2006 and report on what happened to consumer spending and tourism in the March 15th,

When the student visits the page they will see a calendar. When they click on the March 15th date they are taken to the report. They can scroll down to Consumer Spending and Tourism and report on their findings.

The full report they find under that heading is:

Consumer Spending and Tourism

Consumer spending continued to expand. Many Districts reported that retail sales showed solid gains during January, which retailers frequently said were spurred in part by unseasonably warm weather and holiday gift card redemptions. Without the added boost from those factors, retail sales during February softened in the New York, Philadelphia, Richmond, Chicago, and Dallas regions. However, sales in the Atlanta, St. Louis, Kansas City, and San Francisco Districts apparently maintained much of their momentum. Retail inventories were generally at desired levels across the country. Light vehicle sales in many areas were described as "sluggish" or "unusually slow," although Philadelphia and Atlanta noted some improvement in sales between January and February. Vehicle inventories were generally above desired levels.

The majority of reports on tourism were positive. Sales were up over last year at winter-sports destinations in the Richmond, Minneapolis, and Kansas City regions; however, ski resorts in New England and New Mexico were suffering from a lack of snowfall. Warm-weather destinations in the Atlanta and San Francisco Districts reported a brisk pace of activity. Atlanta also noted that tourism in the Gulf Coast region was being re-established slowly, though several casinos experienced larger-than-expected increases in revenues.

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