When the Fed Raises the Discount Rate, It

question 194

Multiple Choice

When the Fed raises the discount rate, it:

• A) lowers the cost of borrowing from the Fed, encouraging banks to make loans to the general public.
• B) raises the cost of borrowing from the Fed, discouraging banks from making loans to the general public.
• C) increases the amount of excess reserves that banks hold, encouraging them to make loans to the general public.
• D) increases the amount of excess reserves that banks hold, discouraging them from making loans to the general public.
• E) decreases the amount of excess reserves that banks hold, discouraging them from making loans to the general public.

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Definitions:

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