Which of the following statements is NOT true?
A
Option A: Commercial banks may borrow from and lend to each other, and the interest rate at which they do this is called the refinancing rate
B
Option B: If the central bank raises its refinancing rate then the commercial banks will try to reduce their lending and so reduce the need to borrow from the central bank
C
Option C: In the UK the refinancing rate is known as the repo rate and in the USA it is referred to as the discount rate
D
Option D: If the central bank has bought some assets from a commercial bank with an agreement that the commercial bank will buy them back at a later date, this is called a repo
E
Option E: The difference between the price at which a commercial bank sells an asset to the central bank and the price at which it agrees to buy it back can be expressed as an annualised percentage of the selling price; this is called the refinancing rate
Correct answer A. Commercial banks may borrow from and lend to each other, and the interest rate at which they do this is called the refinancing rate
Explanation
The rate at which commercial banks lend to and borrow from each other is the interbank rate; the refinancing rate is what the central bank charges banks for liquidity.
Answer checked 11 October 2026 · How we write and check questions
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