Answer:
1. True.
2. True.
Explanation:
The Federal Reserve System ( popularly referred to as the 'Fed') was created by the Federal Reserve Act, passed by the U.S Congress on the 23rd of December, 1913. The Fed began operations in 1914 and just like all central banks, the Federal Reserve is a United States government agency.
Generally, it comprises of twelve (12) Federal Reserve Bank regionally across the United States of America.
1. The discount rate is the interest rate the Fed charges on loans of reserves to banks.
2. The federal funds rate is the interest rate banks charge for overnight loans of reserves to other banks.
Answer:
1: True
2: True
Explanation:
The federal discount rate is the interest rate set by the Federal Reserve (Fed) on loans extended by the central bank to commercial banks or other depository institutions. Adjusting the discount rate allows central banks such as the Fed to reduce liquidity problems and the pressures of reserve requirements, control the supply of money in the economy and basically assure stability in the financial markets.
The Federal Reserve, the nation’s central bank, requires US banks to maintain a certain level of cash reserves at all times. Banks often loan each other money overnight to stay at this level. The federal funds rate is the interest rate they charge one another for these loans. The Fed sets a target for the federal funds rate eight times a year, based on whether it wants to boost or restrain the economy. It can’t change the rate directly, but it buys and sells securities to influence the rate. Historically, it has been as low as 0 percent and as high as nearly 20 percent. The federal funds rate also helps determine the short-term interest rates you might get for credit cards or certain loans.
