Question

Put the term with the correct sentence to complete the statements.

1. The share of deposits that banks must have in reserves is the ___________.
2. The interest rate banks charge each other for very short-term loans is the ___________.
3. The interest rate the Federal Reserve charges commercial banks for loans is the ___________.

WORD BANK
open market operation
discount rate
reserve requirement
federal funds rate

Answer 1

1. The share of deposits that banks must have in reserves is the reserve requirement

2. The interest rate banks charge each other for very short-term loans is the federal funds rate

3. The interest rate of the Federal Reserve charges commercial banks for loans is the discount rate

Step-by-step explanation:

1. The reserve requirement is set by the Federal Reserve and is the minimum percentage of all deposits that banks must keep in reserves.

2. The federal funds rate is the interest rate banks charge each other for loans.

3. The discount rate is the interest rate the Federal Reserve charges to commercial banks for loans.