Question

The amount that a bank must keep in their account with the Fed is called the discount rate. True or False?

Answer 1

The amount that a bank must keep in their account with the Fed is not called the discount rate. It is called the reserve requirement.

Step-by-step explanation:

The statement is False. The amount that a bank must keep in their account with the Federal Reserve is called the reserve requirement, not the discount rate. The discount rate is the interest rate charged to commercial banks and other depository institutions on loans they receive from their regional Federal Reserve Bank's lending facility. It is one of the tools the Fed uses to influence bank behavior and manage monetary policy.