The Discount Rate & Monetary Policy: How Banks Can Borrow Money from the Federal Reserve


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question 1 of 3

Which of the following accurately describes the discount rate?

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1. Why do banks choose to borrow directly from the Fed?

2. Which of the following statements is FALSE regarding the discount rate?

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About This Quiz & Worksheet

These quiz and worksheet tools are designed to help you review the process by which banks borrow money from the Fed. Key topics to understand include the definition of discount rate and when banks borrow from the Fed.

Quiz & Worksheet Goals

In this assessment, you will be tested on your understanding of:

  • The definition of the discount rate
  • The consequences of changing the discount rate
  • Why the Fed is known as 'the lender of the last resort'

Skills Practiced

In addition to reviewing key concepts, you will also be able to practice these skills:

  • Reading comprehension - ensure that you draw the most important information from the related lesson on how banks borrow money from the Federal Reserve
  • Making connections - use understanding of the concept of the discount rate as it applies to banks
  • Information recall - access the knowledge you've gained regarding when banks borrow from the Fed and why

Additional Learning

To learn more about how the Federal Reserve helps banks, borrowers and the economy, refer to the lesson called The Discount Rate & Monetary Policy: How Banks Can Borrow Money from the Federal Reserve. This lesson covers these learning objectives:

  • Learn about how banks help the economy and how they are regulated
  • Understand the discount rate and its importance
  • Identify how the discount rate is used as a tool of monetary policy