Other Things Constant, If the Fed Decreased the Discount Rate

question 155

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) borrowing from the Fed will tend to increase and the money supply will tend to expand.
• D) borrowing from the Fed will tend to decrease and the money supply will tend to decline.

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Definitions:

Economic Profit

The split between entirety of income and the full scope of expenditures, considering both clear and implicit financial obligations.

Production Techniques

Methods and processes used in the creation of goods and services, influenced by technology, labor skills, and resource availability.

Labor and Capital

The primary factors of production where labor refers to human effort and capital represents buildings, machinery, and equipment.

Fundamental Questions

The basic economic questions that every society must answer, which include what to produce, how to produce, and for whom to produce.