Asked by Great Amazing on Apr 26, 2024
Verified
The discount rate is the interest rate that:
A) banks charge on large loans.
B) banks charge on loans to other banks.
C) the Fed charges on loans to branches of the U.S.government.
D) the Fed charges on loans to depository institutions.
E) the Fed charges on loans to the public.
Discount Rate
The rate at which financial institutions can borrow funds from the central bank, often used as a monetary policy tool.
Depository Institutions
Financial institutions that accept deposits from individuals and provide loans.
Fed Charges
Fees or interest rates set by the Federal Reserve, often in the context of lending to financial institutions.
- Outline the methods used by the Federal Reserve to affect monetary policy, specifically through open-market operations and setting the discount rate.
Verified Answer
JH
Jatayaa HowellMay 02, 2024
Final Answer :
D
Explanation :
The discount rate is the interest rate at which the Federal Reserve (the Fed) lends money to depository institutions (such as banks and credit unions) to meet short-term liquidity needs. Therefore, the correct answer is D.
Learning Objectives
- Outline the methods used by the Federal Reserve to affect monetary policy, specifically through open-market operations and setting the discount rate.