The discount rate set by the Fed
A) is the rate of interest charged member banks when they borrow from the Fed to meet their reserve requirements.
B) is the difference between the rate of interest charged to the government for borrowing from the Fed and the rate of interest charged to commercial customers.
C) is the rate at which banks are required to borrow from each other to maintain their compliance with their reserve requirements.
D) is the rate at which the Fed discounts the future when it makes its policy decisions.
E) none of the above.

Question

Quizplus · Accepted Answer

The discount rate is indeed the interest rate charged to commercial banks and other depository institutions on loans they receive from their regional Federal Reserve Bank's lending facility—the discount window. It's used by institutions to meet reserve requirements, making option A correct.

The Discount Rate Set by the Fed