The discount rate is the interest rate that:
A)banks charge on large loans.
B)banks charge on loans to other banks.
C)the Fed charges on loans to branches of the U.S.government.
D)the Fed charges on loans to depository institutions.
E)the Fed charges on loans to the public.

Question

Quizplus · Accepted Answer

The discount rate is the interest rate at which the Federal Reserve (the Fed) lends money to depository institutions (such as banks and credit unions) to meet short-term liquidity needs. Therefore, the correct answer is D.

The Discount Rate Is the Interest Rate That