The rate at which the Fed lends money to banks is
A)the prime rate.
B)fixed at 4%.
C)the federal funds rate.
D)the discount rate.

Question

Quizplus · Accepted Answer

The rate at which the Fed lends money to banks is called the discount rate. Therefore, the correct choice is D. Option A is incorrect because the prime rate is the rate that commercial banks charge their best customers. Option B is incorrect because the Fed can change the discount rate according to economic conditions. Option C is incorrect because the federal funds rate is the rate at which banks lend reserves to one another.

The Rate at Which the Fed Lends Money to Banks