Why Is It Easier for the Fed to Manage the Level

question 5

Multiple Choice

Why is it easier for the Fed to manage the level of bank reserves using the term auction facility (TAF) as opposed to using discount window lending?

• A)Banks do not need to overcome the stigma of requesting a loan when using the TAF.
• B)Banks receive TAF proceeds on a 3-day delay, rather than on the day they are requested.
• C)Banks that use seasonal credit are more likely to use the term auction facility.
• D)Banks receive TAF proceeds after a lengthy verification process.

---

Definitions:

Tax

A required financial imposition or alternative type of assessment placed on taxpayers by government entities to support government budgeting and assorted public outlays.

Efficient Level

Refers to the state where resources are allocated in a way that maximizes the net benefit to society, often achieved when marginal cost equals marginal benefit.

Competitive Output

The level of production that firms in a perfectly competitive market produce and sell at the market price, where marginal cost equals marginal revenue.

Competitive Price

A pricing strategy where the price of a product or service is set based on the prices charged by competitors.