Next month, Commerce Bank plans to increase the amount of new loans it makes. As a member bank of the Federal Reserve, Commerce can borrow from the Fed. Commerce will charge the customer an interest amount greater than the discount rate.

Question

Quizplus · Accepted Answer

As a member bank of the Federal Reserve, Commerce Bank can borrow from the Fed, and it can use these funds to increase the amount of new loans it makes. However, Commerce will charge the customer an interest rate that is greater than the discount rate set by the Fed. This allows the bank to earn a profit on the loan while still being able to access funds from the Fed.

Next Month, Commerce Bank Plans to Increase the Amount of New