Through Changes in the Discount Rate,the Federal Reserve Can

question 215

Multiple Choice

Through changes in the discount rate,the Federal Reserve can

• A)force banks to increase reserves but can't force them to decrease reserves
• B)force banks to decrease reserves but can't force them to increase reserves
• C)force either an increase or a decrease in reserves
• D)give banks an incentive to either increase or decrease reserves but cannot force them to change
• E)affect a commercial bank's major customers by lending to them directly

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Definitions:

Short Run

A period in economics during which some factors of production are fixed, making it impossible to change the level of output quickly.

Long Run

A period in which all factors of production and costs are variable, allowing for full adjustment to changes.

Expand

To increase in size, number, or scope, such as a business growing its operations or a market increasing its reach.

Internal Economies

Cost-saving measures that arise from the expansion of a firm, affecting the production process internally.