When the Discount Rate Is Increased

question 38

Multiple Choice

When the discount rate is increased,

• A) there is more money for banks to lend.
• B) there is an increase in the overall money supply.
• C) there is increased economic activity.
• D) there is an economic slowdown.
• E) the banks will pay less interest to borrow from the Federal Reserve Bank.

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Definitions:

Midpoint Method

A technique used in economics for calculating elasticity by averaging the starting and ending prices and quantities.

Cross-Price Elasticity

Measure of how the quantity demanded of one good responds to a change in the price of another good.

Positive

Affirmative, constructive, or based on factual data; often used in reference to positive statements in economics which describe the world as it is, rather than how it should be.

Good Y

A general term used to represent a specific product or commodity in economic models or discussions.