The discount window is a facility provided by central banks where commercial banks can borrow funds on a short-term basis to meet liquidity needs. Banks usually access this window when they cannot obtain funds from other sources at reasonable interest rates.
Think of the discount window as a backup loan option for banks. It's like when you need some extra money and your parents offer to lend it to you at a lower interest rate than what you would get from other sources.
Central Bank: The monetary authority responsible for managing a country's money supply, controlling interest rates, and maintaining financial stability.
Open Market Operations: The buying or selling of government securities by the central bank to influence the money supply and interest rates in the economy.
Monetary Policy: The actions taken by the central bank to manage and control the money supply, credit availability, and interest rates in an economy.
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