Question

what are the similarities and difference between the federal funds rate and the discount rate?

Answer 1

Differences between Federal fund rate and discount rate is that Federal funds rate is the rate at which bank will be landing to each other and those bank will be borrowing at Federal funds rate who will be having a lower reserve and deficient reserve from other banks. It will be determined by the demand and the supply for the Reserve.

Discount rate is the rate at which Federal Reserve will be lending to the commercial bank at the discounting window.

similarity between the federal funds rate and the discount rate is that both rates will be almost moving in the same direction because at the time of the economic downturn, these rates will be very low because there will be lower interest rate set by the Federal Reserve whereas at the time of the economic boom, these rates will be higher so they will be in synchronisation with the monetary policy of Federal Reserve