If the Fed Raises the Discount Rate, What Happens to Reserves

question 83

Multiple Choice

If the Fed raises the discount rate, what happens to reserves and the money supply?

• A) Reserves increase and the money supply decreases.
• B) Both increase.
• C) Reserves decrease and the money supply increases.
• D) Both decrease.

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Definitions:

Earth Orbiting

The path followed by an object, such as a satellite, as it revolves around the Earth under the influence of gravitational force.

Rotational Axis

An imaginary line around which an object, such as a planet, rotates, determining the direction and orientation of its rotation.

Free-Running Rhythm

Natural cycles of behavior or physiological processes that operate independently of external cues, often studied in the context of circadian rhythms.

External Cues

Environmental signals or triggers that can elicit or influence behavior, emotions, or physiological responses.