When the Federal Reserve lends reserves to depository institutions, it charges them interest. That interest rate is called the
A) prime rate.
B) federal funds rate.
C) loan rate.
D) discount rate.

Question

Quizplus · Accepted Answer

The interest rate charged by the Federal Reserve when lending reserves to depository institutions is called the discount rate. The prime rate is the interest rate that commercial banks charge their best customers, the federal funds rate is the interest rate that banks charge each other for overnight loans, and the loan rate can refer to a variety of interest rates for different types of loans.

When the Federal Reserve Lends Reserves to Depository Institutions, It