Discount rate lending occurs when the Federal Reserve:
A) buys and sells government bonds.
B) lends reserves directly to banks.
C) provides reserves to banks through auction.
D) buys corporate bonds in lagging sectors of the economy.

Question

Quizplus · Accepted Answer

Discount rate lending occurs when the Federal Reserve lends reserves directly to banks. A is incorrect because buying and selling government bonds is open market operations. C is incorrect because auctioning reserves is also open market operations. D is incorrect because the Federal Reserve typically does not buy corporate bonds.

Discount Rate Lending Occurs When the Federal Reserve