Question

Which of the following can banks use to borrow from the Federal Reserve?

a. the discount window or the term auction facility
b. the discount window but not the term auction facility
c. the term auction facility but not the discount window
d. Banks cannot borrow from the Federal Reserve, only the government can.

Answer 1

Answer:

a. the discount window or the term auction facility

Explanation:

The discount window is an instrument of monetary policy usually controlled by central banks of the nation that allows eligible institutions to borrow money from the central bank, usually on a short-term basis, to meet temporary shortages of liquidity caused by internal or external disruptions.

Term Auction Facility (TAF) is the same as discount window since the eligible collateral for loans is the same for both.