Answer:
In this situation we have variety of choices.
we can call in or sell off loans .
we can go to the discount window .
we can borrow reserves in the federal funds market .
we have to choose one of these.
Step-by-step explanation:
- "We are offering loans so that they can lend to more customers." Many lenders are selling loans to other banks while retaining the freedom of operation.
- The discount window is a fiscal policy tool usually regulated by central banks which enables qualified institutions to borrow money from the central bank, typically on a quick-term basis, to meet immediate liquidity deficits caused by internally or externally disruptions.
- Federal Reserve funds are the collateral deposits banks do at the end of every day to meet the cost of borrowing. The Federal Reserve is using the fed funds to regulate interest rates for the country. It is because the institutions borrow each other's fed money. We offer a rate of interest we term the cost of fed funds.