Answer :

I believe the answer is: Federal funds rate

There are some circumtances when the amount of money that is stored in the banks is lesser than the amount that they need to maintain their operation. In this case, they could borrow the amount of money that they need to sustain it from other banks. In return, they need to pay them back with interests. This interests is called the federal funds rate.

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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 Explanation

Under 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 institutions
  • Providing support for commercial banks across the country

LEARN MORE:

  • The rate is the interest rate banks charge each other for borrowing or storing money brainly.com/question/2640705
  • The federal fund rate is the interest rate banks charge each other for borrowing or storing money brainly.com/question/10273175

KEYWORDS:

  • federal funds rate
  • federal reserve bank
  • united states
  • commercial banks
  • interest rate

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