The Reason That the Fed Does Not Actively Use Discount

question 8

Multiple Choice

The reason that the Fed does not actively use discount rate policy to control the money supply is because the Fed

• A)acts when a majority of member banks agree on policy and the banks rarely agree.
• B)earns interest on discounting and cannot afford to lose the revenue.
• C)does not know how banks will respond to discount rate changes.
• D)has been directed by Congress to set the discount rate at a permanent level.

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Definitions:

Cognitive Development

The process through which individuals acquire the ability to think, learn, and understand as they progress through childhood to adulthood.

Conservation

The principle in cognitive development that recognizes the ability to understand that redistributing material does not affect its mass, number, or volume.

Cognitive Development

The process by which individuals acquire the ability to think, learn, reason, and remember over time, often associated with childhood development.

Sensorimotor

Referring to a developmental stage in infants where they learn about the world through sensory experiences and motor activities.