If the Discount Rate Is Lowered,banks Choose to Borrow

question 250

Multiple Choice

If the discount rate is lowered,banks choose to borrow

• A) less from the Fed so reserves increase.
• B) less from the Fed so reserves decrease.
• C) more from the Fed so reserves increase.
• D) more from the Fed so reserves decrease.

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Definitions:

Marginal Cost

The cost of producing one additional unit of a good or service, considering all variable resources used in production.

Monopolistic Competition

A type of imperfect competition such that many producers sell products that are differentiated from one another (e.g., by branding or quality) and hence are not perfect substitutes.

Irrational Consumers

Refers to the idea that consumers often make decisions that deviate from the assumptions of rationality in economics, such as making impulsive or emotionally driven purchases.

Market Power

The ability of a company or entity to influence the price and production levels in a market.