Asked by Andrea Perez on May 26, 2024
Verified
The discount rate is the rate the Federal Reserve charges banks for loans. By lowering this rate, the Fed provides banks with a greater incentive to borrow from it.
Discount Rate
The interest rate charged to commercial banks and other financial institutions for loans received from the Federal Reserve's discount window.
Federal Reserve
The Federal Reserve is the central banking system of the United States, responsible for monetary policy, regulating banks, maintaining financial stability, and providing financial services.
- Understand the apparatuses and strategies utilized by the Federal Reserve to impact the circulation of money and operations within banks.
- Investigate the impact and function of monetary policy within economic contexts, especially in managing crises.
Verified Answer
MM
Michael MisabiroMay 29, 2024
Final Answer :
True
Explanation :
Lowering the discount rate reduces the cost for banks to borrow money from the Federal Reserve, making it more attractive for them to take out loans, which can increase the money supply and stimulate economic activity.
Learning Objectives
- Understand the apparatuses and strategies utilized by the Federal Reserve to impact the circulation of money and operations within banks.
- Investigate the impact and function of monetary policy within economic contexts, especially in managing crises.