Why discount rate plays important role in monetary policy

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Reference no: EM131926144

Question: The discount rate for primary credit is the second most commonly used monetary policy tool. However, banks rarely borrow money at the discount rate from the Federal Reserve. Provide three reasons why the discount rate plays such an important role in monetary policy (and the functionality of financial markets in general) even though banks do no frequently borrow money from the Federal Reserve.

Reference no: EM131926144

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