Question

The discount rate refers to which tool of monetary policy?

A. The ability to adjust interest rates for investors who purchase

stocks

B. The ability to buy and sell treasury securities on an open market

C. The ability to change the cost banks have to pay to borrow money

D. The ability to require banks to hold a certain amount of money in

reserve

Answer 1

Answer: C

Step-by-step explanation:

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Answer 2

C. The ability to change the cost banks have to pay to borrow money

Step-by-step explanation:

The federal discount rate may be defined as the interest rate that are charged by the Federal bank to the other banks or financial institutions who borrow money from them. This set by the governors' of the Federal Reserve's board. Thus it is the tool in the monetary policy that change the cost the banks have to pay to the Federal bank for the borrowed funds.