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:

Stimulus Eliciting

A process by which a specific stimulus provokes a response or reaction in an organism or system.

Response Paired

A concept in conditioning where a specific stimulus is repeatedly and consistently followed by a particular response.

Extinction

In psychology, the diminishing of a conditioned response, typically when the conditioned stimulus is no longer paired with the unconditioned stimulus.

Repeated Pairings

A concept from behavioral psychology where repeated association of two stimuli results in the learning or conditioning of a response.