Answer:
C) The Federal Reserve when it lends money to private banks.
Explanation:
The federal reserve advances short term loans to commercial banks to cover their cash shortages, especially the reserve requirements. The discount rate is the term that describes the interest rate the federal reserve applies for loans to commercial banks and other institutions. Commercial banks approach the Fed for loans if they cannot find other alternatives in the market.
The Fed sets the discount rate. It is not the market rate, but it influences market rates. The discount rate is one of the monetary policy tools available for use by the Fed.
