In practice, the Federal Reserve keeps the discount rate close to the ________ rate in order to avoid large swings in borrowed reserves by banks.
A) inflation
B) six-month Treasury bill
C) federal funds
D) prime

Question

Quizplus · Accepted Answer

The Federal Reserve keeps the discount rate close to the federal funds rate to maintain stability in the banking system and ensure that banks do not borrow excessively from the Fed when the federal funds rate is lower.

In Practice, the Federal Reserve Keeps the Discount Rate Close