When a Member Bank Borrows Reserves from the Fed

question 1

Multiple Choice

When a member bank borrows reserves from the Fed,

• A) it pays an interest rate called the discount rate.
• B) it pays no interest rate but is required to repay the loan within the stipulated period.
• C) it pays an interest rate equivalent to the coupon rate on long-term government bonds.
• D) it pays an interest rate equal to the federal funds in the reserves market.

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Definitions:

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