The Reason That the Fed Does Not Actively Use Discount

question 8

Multiple Choice

The reason that the Fed does not actively use discount rate policy to control the money supply is because the Fed

• A)acts when a majority of member banks agree on policy and the banks rarely agree.
• B)earns interest on discounting and cannot afford to lose the revenue.
• C)does not know how banks will respond to discount rate changes.
• D)has been directed by Congress to set the discount rate at a permanent level.

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Definitions:

Mental Processes

The operations of the mind, such as thinking, learning, memory, and perception, that enable understanding and response to the environment.

Behaviourism

A theory in psychology which states that all behaviors are learned through interaction with the environment, emphasizing the importance of observable actions over internal mental states.

Behaviourist

A psychologist who studies and applies theories based on the belief that all behaviors are acquired through conditioning.

Psychoanalytic

Pertaining to a theory of psychology and method of psychotherapy, originally developed by Sigmund Freud, that emphasizes the role of unconscious factors in determining behavior.