ECONOMICS
FEDERAL RESERVE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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The discount rate.
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The prime rate.
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The federal funds rate.
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The required reserve rate.
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Detailed explanation-1: -The discount rate is the interest rate charged to commercial banks and other depository institutions on loans they receive from their regional Federal Reserve Bank’s lending facility-the discount window.
Detailed explanation-2: -Banks can borrow from the Fed to meet reserve requirements. The rate charged to banks is the discount rate, which is usually higher than the rate that banks charge each other. Banks can borrow from each other to meet reserve requirements, which is charged at the federal funds rate.
Detailed explanation-3: -One place a bank can get reserves is by borrowing from the Fed. Of course, whenever a person or a business or an organization borrows, it must pay interest. And a bank that borrows from the Fed must pay interest to the Fed. The interest rate that the Fed charges to banks that borrow from it is called the discount rate.
Detailed explanation-4: -What is the current federal reserve interest rate? The current Federal Reserve interest rate, or federal funds rate, is 4.50% to 4.75% as of Feb. 2, 2023.