Federal funds are unsecured short-term loans between banks, typically settled in immediately available funds. These funds are used to meet reserve requirements and manage short-term liquidity needs. The other options listed involve some form of security or collateral, which is not characteristic of federal funds.

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Federal Funds Are

Question 28

Multiple Choice

Federal funds are:

A) secured bank loans from the discount window.
B) unsecured short-term loans that are settled in immediately available funds.
C) secured inter-bank loans of reserves.
D) secured core deposits.
E) secured overnight loans.

Correct Answer: