Other Things Constant, If the Fed Decreased the Discount Rate

question 48

Multiple Choice

Other things constant, if the Fed decreased the discount rate,

• A) the earnings of the Fed would increase.
• B) the incentive of commercial banks to borrow from the Fed would be reduced.
• C) the prime interest rate would automatically decline.
• D) commercial banks probably would reduce their excess reserves and be more willing to extend additional loans.

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Definitions:

Mountain Ranges

Chains or clusters of mountains that are close together in a line or a group, often formed by tectonic forces or volcanism.

Flooding Hazards

Risks associated with excessive water, often due to heavy rainfall or river overflow, that can cause damage to structures and loss of life.

Mudslide Hazards

Risks associated with rapid downslope movement of soil and rock, often triggered by heavy rainfall or seismic activity.

Devils Tower

A striking volcanic rock formation located in the Black Hills of northeastern Wyoming, USA.