Question 1
The interest rate paid on government securities that mature in less than a year is the
◦ prime rate.
◦ discount rate.
◦ federal funds rate.
◦ Treasury bill rate.
Question 2
The federal funds rate is the interest rate that
◦ the Fed charges commercial banks to borrow reserves.
◦ commercial banks charge each other for borrowing and lending reserves.
◦ the government pays on securities that mature in less than a year.
◦ commercial banks charge their best customers to borrow money.