ECONOMICS
MONETARY POLICY
|
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
The Fed raises the discount rate; what happens to the money supply?
|
|
lower the money supply
|
|
|
increase the money supply
|
|
|
Either A or B
|
|
|
None of the above
|
Explanation:
Detailed explanation-1: -When the Federal Reserve increases the discount rate banks become more cautious and tend to hold extra reserves. Because banks hold extra reserves, this money will not increase through multiple deposit creation and the money supply will decrease.
There is 1 question to complete.