If the Fed Decreases the Discount Rate, What Happens to Reserves

question 54

Multiple Choice

If the Fed decreases the discount rate, what happens to reserves and the money supply?

• A)Reserves increase and the money supply decreases.
• B)Both increase.
• C)Reserves decrease and the money supply increases.
• D)Both decrease.

---

Definitions:

Exaggerated Hockey Stick

A term used to describe a revenue growth projection for a business that unrealistically shows a sharp increase in revenue after a certain point, resembling a hockey stick.

Slip-On Shoe

A type of shoe that does not require lacing or fastening, designed to be easily slipped on and off the foot.

Market

The arena in which commercial dealings are conducted, often referring to the supply and demand for goods and services.

Business Structure

The legal and organizational framework chosen for a company, affecting liability, taxes, and management strategy.