Which of the following is able to most effectively impact money market lending?

Multiple Choice
discount rate
bank policy rate
interest rate paid on reserve balances
6-month certificate of deposit rate

1 answer

The option that is able to most effectively impact money market lending is the discount rate.

The discount rate is the interest rate at which commercial banks can borrow funds from the central bank (such as the Federal Reserve in the United States) usually on a short-term basis. Changes in the discount rate can directly influence the cost of borrowing for banks, which in turn affects their lending rates to consumers and businesses in the money market.

While the other options can have an impact on lending as well, the discount rate is particularly significant in the context of influencing money market conditions directly through bank borrowing behaviors.