The interest rate that the fed charges banks that borrow money from it is called a. the discount rate. b. the federal rate. c. the monetary rate. d. the bank-member rate.

The correct answer is A. The interest rate that the Fed charges banks that borrow money from it is called the discount rate.

Explanation:

The discount rate is the interest rate at which a bank can sell (rediscount) bills of exchange to the central bank. This enables it to obtain liquidity in the short term. It pays the discount rate as a price (as a discount from the nominal value).

The Federal Reserve uses two discount rates for very short-term loans it gives to financial institutions during the "discount window": the "primary rate" and the "secondary rate”.

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