Capital MarketsQuestion 333 of 398
The federal funds rate is best described as the interest rate:
a.The Fed charges banks that borrow at the discount window
b.Commercial banks charge their most creditworthy corporate customers
c.Banks charge one another for overnight loans of reserve balances
d.The Treasury pays on newly issued bills
Explanation
The federal funds rate is the rate banks charge each other for very short-term (typically overnight) loans of reserves held at the Fed. The Fed sets a target range for this rate as a key element of monetary policy.
Practice all 398 questions free — no signup required.
Related questions on this topic
- Which of the following is a tool of the Federal Reserve's monetary policy?
- If the Federal Reserve wants to stimulate a slowing economy, which action would it most likely take?
- The interest rate the Federal Reserve charges member banks for short-term loans directly from the Fed is called the:
- Fiscal policy, as distinguished from monetary policy, is controlled by which entities?
- Gross domestic product (GDP) is best defined as:
- A common technical definition of a recession is:
Last reviewed: · editorial process
PrepPass Editorial Team · Verified against FINRA Securities Industry Essentials (SIE) Exam · How we review