The primary purpose of the discount window is to
A)influence the nation's money supply.
B)fulfill the bank's lender of last resort role.
C)control banks' excess reserves.
D)influence the amount of loans that banks provide to the public.

Question

Quizplus · Accepted Answer

The discount window is a tool used by central banks to provide short-term loans to banks that are struggling to meet their daily liquidity needs. Its primary purpose is to fulfill the bank's lender of last resort role, which is to ensure the stability of the banking system and prevent bank runs. The discount rate set by the central bank also affects the interest rates charged by banks on loans, and can thereby influence the supply of credit to the public. However, this is a secondary effect, and not the primary purpose of the discount window.

The Primary Purpose of the Discount Window Is to