The discount rate is kept ________ the federal funds rate because the Fed prefers that ________.

Question

Quizplus · Accepted Answer

The discount rate is kept above the federal funds rate because the Federal Reserve prefers that banks borrow reserves from each other rather than relying on the central bank as a primary source of funding. This encourages a more active interbank lending market and reduces the dependency on the Federal Reserve for liquidity.

The Discount Rate Is Kept ________ the Federal Funds Rate