You are the manager of a local bank. Due to unstable financial conditions, savers are worried that your bank may fail. When they show up in large numbers to withdraw their savings, you find that you do not have enough cash to meet the obligations. Where can you turn for a loan if no other bank will lend to you?
A)The bond markets
B)The market for overnight loans
C)The discount window
D)The stock market

Question

Quizplus · Accepted Answer

The discount window is a facility that offers short-term loans to banks and other depository institutions. These loans are usually provided by the central bank of a country, such as the Federal Reserve in the United States. Banks in need of quick funds can borrow from the discount window, even if they cannot secure a loan from another bank. However, using the discount window may signal to the public that the bank is facing financial difficulties and may lead to further withdrawals from savers.

You Are the Manager of a Local Bank