The rate of interest charged by the Fed and paid by banks when they borrow reserves from the Fed is called the

Question

Quizplus · Accepted Answer

The rate of interest charged by the Fed and paid by banks when they borrow reserves from the Fed is called the discount rate. Option E is the only option that mentions the discount rate, making it the best choice. The federal funds rate is the interest rate banks charge each other for overnight loans, the prime rate is the interest rate that banks extend to their best customers, the real interest rate is the nominal interest rate adjusted for inflation, and the reserve rate (also known as the reserve requirement) is the portion of depositors' balances that banks must set aside in reserve.

The Rate of Interest Charged by the Fed and Paid