A) The discount rate is the interest rate the Fed charges on mortgage loans to private citizens.
B) The discount rate is the reduced interest fee on overnight loans by commercial banks.
C) The discount rate is the federal funds rate on overnight loans to private businesses.
D) The discount rate is the rate of interest the Fed charges on its loans to commercial banks.
1 answer
The best explanation of how the Federal Reserve employs the discount rate is:
D) The discount rate is the rate of interest the Fed charges on its loans to commercial banks.
This statement accurately defines the discount rate as it relates to the loans that the Federal Reserve provides to commercial banks.
