Asked by Samantha Ortiz on Jun 15, 2024
Verified
The interest rate at which the Federal Reserve Banks lend to commercial banks and thrift institutions are called
A) the prime rate.
B) the short-term rate.
C) the discount rate.
D) the Federal funds rate.
E) None of the choices are correct.
Discount Rate
The cost imposed on banks and similar entities for borrowing funds from the Federal Reserve's discount window.
Commercial Banks
Financial institutions that offer a wide range of services, including accepting deposits, providing loans, and other investment products to individuals and businesses.
- Recognize and differentiate among the various instruments employed by the Federal Reserve to manage the money supply.
Verified Answer
AB
Aaron BedollaJun 17, 2024
Final Answer :
C
Explanation :
The discount rate is the interest rate at which commercial banks and thrift institutions can borrow from the Federal Reserve Banks, making it the correct answer. The prime rate is the rate that banks charge their most credit-worthy customers, and the short-term rate refers to any interest rate on a short-term loan or investment. The Federal funds rate is the interest rate that banks charge each other for overnight loans of their reserve balances.
Learning Objectives
- Recognize and differentiate among the various instruments employed by the Federal Reserve to manage the money supply.