The discount rate is the interest rate the Fed charges on loans of reserves to banks. The federal funds rate is the interest rate banks charge for overnight loans of reserves to other banks.   Which of the following statements about the discount rate and the federal funds rate are true? (More than one may be correct)   A. A lower discount rate discourages banks from borrowing reserves and making loans.   B. Usually, banks borrow from the federal funds market rather than the discount window.   C. The federal funds rate is a primary barometer of Fed policy reported in the media.   D. If the Fed wants to expand the money supply, it can reduce the discount rate.

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Financial Institutions and Federal Bank

The word financial institution is a kind of business organization that deals with the financial activities of a nation. These activities include accepting deposits, making payments, granting loans and advances, transferring funds, holding shares, providing credits, purchasing and selling foreign exchanges, investments in shares, futures commodities, and many more.