Title: QUIZ: Open for Business: Understanding the Fed's Discount Window -- Page One Economics®
Course: Kelly's Copying and Exporting Course > Section: Open for Business: Understanding the Fed's Discount Window -- Page One Economics®

Q: What was the primary motivation behind Congress creating the Federal Reserve System in 1913?
- To increase government revenue
- To prevent financial crises and support the stability of the banking system
- To reduce the national debt
- To promote international trade
A: To prevent financial crises and support the stability of the banking system

Q: What is the term for the funds that member banks have in their accounts at their District Federal Reserve Bank?
- Deposits
- Reserves
- Investments
- Savings
A: Reserves

Q: What is the term for the interest that the Federal Reserve charges for short-term loans accessed through the discount window?
- Prime rate
- Federal funds rate
- Discount rate
- Treasury rate
A: Discount rate

Q: How did the discount window get its name?
- From the historical practice of bank representatives going to a teller window at their District Federal Reserve Bank to access credit
- From the discounted rate of interest that banks charged when borrowing from each other
- From the historical practice of offering a discounted rate on credit if representatives came in person to their District Federal Reserve Bank
- From the last name of the teller at one of the District Federal Reserve Banks
A: From the historical practice of bank representatives going to a teller window at their District Federal Reserve Bank to access credit

Q: What type of assets can banks easily convert to cash with little loss of value?
- Liquid assets
- Non-liquid assets
- Fixed assets
- Equity assets
A: Liquid assets

Q: What type of assets can banks not easily convert to cash without losing value in the conversion process?
- Liquid assets
- Non-liquid assets
- Fixed assets
- Equity assets
A: Non-liquid assets

Q: Why might a bank need to borrow from the Federal Reserve?
- To cover large withdrawals when they lack liquid assets
- To match their non-liquid assets on their balance sheets
- To pay off long-term debts
- To increase their profit margins
A: To cover large withdrawals when they lack liquid assets

Q: What must banks provide to secure a discount window loan from the Federal Reserve?
- Proof of customer deposits
- Collateral
- A detailed business plan
- An external auditor's report
A: Collateral

Q: How do short-term loans from the Federal Reserve support the banking system?
- By allowing banks to borrow from each other
- By helping banks manage liquidity risks
- By increasing a bank's non-liquid assets
- By reducing the need for customer deposits
A: By helping banks manage liquidity risks

Q: What is the interest rate called when banks borrow funds from each other?
- Treasury rate
- Discount rate
- Prime rate
- Federal funds rate
A: Federal funds rate