ECONOMICS
MONETARY POLICY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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provide short-term loans to banks that need money.
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set monetary policy.
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provide low-interest loans to banks.
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handle transactions related to the buying and selling of securities.
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Detailed explanation-1: -What Is a Discount Window? The discount window is a central bank lending facility meant to help commercial banks manage short-term liquidity needs. Banks that are unable to borrow from other banks in the fed funds market may borrow directly from the central bank’s discount window paying the federal discount rate.
Detailed explanation-2: -By providing ready access to funding, the discount window helps depository institutions manage their liquidity risks efficiently and avoid actions that have negative consequences for their customers, such as withdrawing credit during times of market stress.
Detailed explanation-3: -Banks with sound finances that can post collateral are eligible for short-term loans from the discount window for up to 90 days. Our program of providing discount window loans to banks is designed specifically to enable the banks to make lower-cost, longer-term loans to households and businesses.
Detailed explanation-4: -The Federal Open Markets Committee (FOMC) sets the federal funds rate-also known as the federal funds target rate or the fed funds rate-to guide overnight lending among U.S. banks. It’s set as a range between an upper and lower limit. The federal funds rate is currently 4.50% to 4.75%.
Detailed explanation-5: -The Federal Reserve System, often referred to as the Federal Reserve or simply “the Fed, ” is the central bank of the United States. It was created by the Congress to provide the nation with a safer, more flexible, and more stable monetary and financial system.