Which of the following observations concerning the Fed's discount window is true?
A)The facility is provided to meet DIs' permanent liquidity needs.
B)Four lending programs are offered through the Fed's discount window.
C)Primary credit is available to sound depository institutions on a very short-term basis.
D)Secondary credit is available only to depository institutions that are eligible for primary credit.
E)Eligible institutions for seasonal credit are big banks located in urban areas.

Question

Quizplus · Accepted Answer

Primary credit is indeed available to sound depository institutions on a very short-term basis. The other statements are incorrect: A) the discount window is used for short-term liquidity needs, not permanent ones; B) there are actually three lending programs offered (primary credit, secondary credit, and seasonal credit); D) secondary credit is available to institutions that are not eligible for primary credit; E) eligible institutions for seasonal credit are not limited to big banks located in urban areas, but may include smaller institutions that experience seasonal fluctuations in liquidity needs.

Which of the Following Observations Concerning the Fed's Discount Window