When banks borrow on the federal funds market

Name: When banks borrow on the federal funds market
Brand: Quizplus
Rating: 4.8 (51 reviews)

Question

Quizplus · Accepted Answer

The federal funds rate, which is the interest rate at which banks lend to each other overnight, is typically lower than the discount rate, which is the interest rate the Federal Reserve charges banks for direct loans. The discount rate is usually set higher as a discouragement for banks to rely on direct borrowing from the Federal Reserve, encouraging them instead to borrow from each other.

When Banks Borrow on the Federal Funds Market