Answer:
D. the interest rate that banks charge each other for overnight loans
Explanation:
The federal fund rate is the interest rate that commercial banks charge each other for overnight lending. The banks borrow and lend from each other to meet their reserve requirements. The Fed requires banks to maintain a certain percentage of their deposits as reserve every day. A bank that falls short of its reserve requirement is allowed to borrow from the banks that have an excess.
A bank that lends to another bank charges an interest rate, which is the federal funds rate. The Federal Reserve sets the federal fund rate as part of its monetary policy. The Fed uses the federal fund rate to regulate the money supply in the economy.
Answer:
D. The interest rate that banks charge each other for overnight loans
Explanation:
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