Asked by Sagar Rajput on Jul 02, 2024
Verified
Which of the following is correct regarding the discount rate?
A) It is the interest rate that commercial banks charge their most creditworthy customers.
B) It is the interest rate that thrift institutions charge for home mortgages.
C) It is the interest rate at which depository institutions can borrow from the Federal Reserve.
D) It is the interest rate set in the market for U.S.Treasury Bills.
E) It is the prime interest rate.
Discount Rate
The interest rate the Fed charges banks that borrow reserves
Depository Institutions
Financial organizations, such as banks and credit unions, that accept deposits from individuals and provide loans and other financial services.
Borrow
Obtaining funds from another party with the promise to return the principal amount along with agreed-upon interest or dividends.
- Elucidate on the Federal Reserve's mechanisms, including open-market operations and the discount rate, for manipulating monetary policy.
Verified Answer
AM
ashziantah mendoza6 days ago
Final Answer :
C
Explanation :
The discount rate is the interest rate at which depository institutions (such as banks) can borrow from the Federal Reserve.
Learning Objectives
- Elucidate on the Federal Reserve's mechanisms, including open-market operations and the discount rate, for manipulating monetary policy.