Discount rate means
Discount rate means
- A) Rate at which money are borrowed from commercial bank
- B) Rate at which bank receive deposit from the public
- C) Central bank rate on the money borrowed by commercial banks
- D) Commercial bank rate on the money borrowed from other commercial bank
Correct Answer: C) Central bank rate on the money borrowed by commercial banks
Explanation
The question is asking about the meaning of discount rate. The options are given as: A) rate at which money are borrowed from commercial bank, B) rate at which bank receive deposit from the public, C) central bank rate on the money borrowed by commercial banks (which is the correct option), and D) commercial bank rate on the money borrowed from other commercial bank.
Discount rate is the rate at which the central bank lends money to commercial banks. When commercial banks need money, they can borrow from the central bank at the discount rate. This is an important tool for the central bank to manage the money supply in the economy.
Option A, rate at which money are borrowed from commercial bank, is incorrect as this is the commercial bank lending rate to customers, not the discount rate. Option B, rate at which bank receive deposit from the public, is also incorrect as this is the interest rate paid by banks to customers on their deposits, not the discount rate. Option D, commercial bank rate on the money borrowed from other commercial bank, is also incorrect as this is the interbank lending rate, not the discount rate.
In summary, the correct answer is option C, central bank rate on the money borrowed by commercial banks.