Principles of Macroeconomics / Unit 12 MAC 1118 short lesson, about 20 seconds
The Discount Rate and the Discount Window
Captions available
The idea
Banks short of reserves can borrow from the central bank at the discount window, and the rate charged is the discount rate. Raising it discourages borrowing; lowering it encourages it.
In practice
A typical bank uses the window once or twice a year.
Where people slip
It sits above the rate banks charge each other, so it is a backstop.
Your place on the trail
Every lesson rests on earlier ones and opens later ones. Tap any to jump.
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