Other Things Constant, If the Fed Decreased the Discount Rate

question 48

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) the prime interest rate would automatically decline.
• D) commercial banks probably would reduce their excess reserves and be more willing to extend additional loans.

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Definitions:

Self-actualization

A concept in psychology referring to the realization or fulfillment of one's talents and potentialities, often seen as the highest need in a hierarchy of human needs.

Unique Potential

An individual's distinct combination of skills, abilities, and inclinations that can be developed to achieve specific goals or outcomes.

Esteem Needs

According to Maslow's hierarchy of needs, these are the fourth level of human needs, including self-esteem, confidence, and respect from others.

Anterior Cingulate Cortex

A part of the brain's limbic system, involved in emotion regulation, decision making, and the physiological responses to potential rewards and pain.