The rate________ is the interest rate at which the Fed lends ____________to depository institutions.
A) federal funds rate; deposits
B) federal funds rate; reserves
C) discount rate; reserves
D) discount rate; gold

Question

Quizplus · Accepted Answer

The discount rate is the interest rate at which banks can borrow money directly from the Federal Reserve. It is often used as a last resort when banks cannot borrow from other sources. The discount rate is set by the Federal Reserve and is typically higher than the federal funds rate, which is the interest rate at which depository institutions lend money to each other overnight. The correct pair of options that complete the sentence is "The rate DISCOUNT RATE is the interest rate at which the Fed lends RESERVES to depository institutions."

The Rate________ Is the Interest Rate at Which the Fed