The Rate Is The Interest Rate Banks Charge Each Other For Borrowing Or Storing Money.

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Question

The ____ rate is the interest rate banks charge each other for borrowing or storing money. A.)Federal Reserve Interest B.)federal funds C.)loan interest

Answer

Answering the question, the Federal fund rate is the interest rate banks charge each other for borrowing or storing money.The federal fund rate can be defined as the interest rate that banks charge when they take money from their reserve balance and borrow other banks on an overnight basis.Further ExplanationUnder the financial law, it is a must for all banks to maintain certain deposits in their accounts with the Federal Reserve Bank. This also implies that the banks must maintain a reserve that is equal to a particular percentage of their accounts.However, if banks have more than the required amount in their accounts, they can decide to borrow other banks.In the United States, the federal fund rate is one of the most significant interest rates. It is very significant because it affects monetary and other financial conditions which influence some critical aspects of the economy such as inflation, growth, and employment.The federal fund rate also has a major influence on the short term interest rate and the prime rate.The Federal Reserve Bank is the central bank of the United States. It was created in 1913 with the introduction of the Federal Reserve act.The functions of the Federal Reserve Bank include:Controlling the activities of financial institutionsProviding support for commercial banks across the countryLEARN MORE:The rate is the interest rate banks charge each other for borrowing or storing money tophomeworkanswers.com.com/question/2640705The federal fund rate is the interest rate banks charge each other for borrowing or storing money tophomeworkanswers.com.com/question/10273175KEYWORDS:federal funds ratefederal reserve bankunited statescommercial banksinterest rate

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