When the Fed Lowers the Discount Rate, It Makes It

question 56

Multiple Choice

When the Fed lowers the discount rate, it makes it

• A) cheaper for banks to borrow from each other.
• B) cheaper for banks to obtain additional reserves by borrowing from the Fed.
• C) more difficult for banks to accept deposits.
• D) more difficult for banks to extend loans.

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Definitions:

Electrolytes

Substances that produce ions and conduct electricity when dissolved in water.

Not Electrolytes

Substances that do not dissociate into ions in solution and therefore cannot conduct electricity in their molten or aqueous states.

Non-electrolytes

Substances that do not produce ions when dissolved in water, and hence do not conduct electricity in solution.

Non-electrolyte

A substance that does not readily ionize when dissolved or melted and is therefore a poor conductor of electricity.