AP® Macroeconomics

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Discount Rate and the Federal Reserve

APMACR-URKENY

One tool of the Fed is the Discount Rate.

Which of the following best represents the meaning of the term Discount Rate?

A

The rate the Fed charges its best business clients.

B

The rate the Federal Reserve charges the government when it needs money due to deficit spending.

C

The rate the Federal Reserve charges its member banks for emergency loans.

D

The inflation rate set by the Federal Reserve.

E

The interest rate the Fed charges foreign borrowers.