When banks obtain funds in the federal funds market, the providers of the funds are

Question

Quizplus · Accepted Answer

The federal funds market is a market where banks and other financial institutions lend and borrow funds overnight. The providers of the funds in this market are typically other depository institutions as they have excess reserves that they can lend to other banks who may need funds to meet reserve requirements or to provide short-term liquidity. Nonfinancial corporations and consumers do not participate in this market. The Federal Reserve may also lend funds in the federal funds market but typically does so through open market operations rather than directly.

When Banks Obtain Funds in the Federal Funds Market, the Providers