How does an increase in the discount rate by the Federal Reserve affect the money supply and the interest rate? The increase of the discount rate encourages banks to borrow from the Federal Reserve. Banks increase their lending to customers thus increasing the money supply and decreasing the interest rate. The increase of the discount rate discourages banks from borrowing from the Federal Reserve. Banks decrease their lending to customers thus increasing the money supply and decreasing the interest rate. The increase of the discount rate discourages banks from borrowing from the Federal Reserve. Banks increase their lending to customers thus increasing the money supply and increasing the interest rate. The increase of the discount rate discourages banks from borrowing from the Federal Reserve. Banks decrease their lending to customers thus reducing the money supply and increasing the interest rate.

How does an increase in the discount rate by the Federal Reserve affect the money supply and the interest rate? The increase of the discount rate encourages banks to borrow from the Federal Reserve. Banks increase their lending to customers thus increasing the money supply and decreasing the interest rate. The increase of the discount rate discourages banks from borrowing from the Federal Reserve. Banks decrease their lending to customers thus increasing the money supply and decreasing the interest rate. The increase of the discount rate discourages banks from borrowing from the Federal Reserve. Banks increase their lending to customers thus increasing the money supply and increasing the interest rate. The increase of the discount rate discourages banks from borrowing from the Federal Reserve. Banks decrease their lending to customers thus reducing the money supply and increasing the interest rate.

Economics For Today

10th Edition

ISBN:9781337613040

Author:Tucker

Publisher:Tucker

Chapter26: Monetary Policy

Section: Chapter Questions

Problem 5SQ

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The discount rate is the interest rate that Group of answer choices the Fed charges Congress for loans. banks charge one another for loans. the Fed charges banks for loans. banks charge the Fed for loans.
Fed Cuts Key Interest Rate Again Washington, DC—Alarmed by the rapidly weakening economy, the Federal Reserve cut a key interest rate again yesterday. The Fed cut the discount rate, dropping it from 2.75 percent at the beginning of the year to a mere 0.25 percent now. The discount rate is the rate the Fed charges for loans it makes to private banks. By dropping the rate, the Fed is hoping banks will borrow more money, then use that money to make new loans to businesses and consumers. What has spooked the Fed is that GDP is falling at the fastest rate in 50 years. The Fed is hoping that record low interest rates will prompt more spending, preventing a protracted recession. If every one-point change in the federal funds rate alters aggregate demand by $180 billion, how far would AD shift in response to the interest rate cuts?
The federal funds rate is the interest rate the Fed charges commercial banks. the interest rate a bank charges its best customers. the interest rate banks charge each other for overnight loans. the interest rate on a Treasury Bill.
#32. When the Fed decreases the discount rate, banks will a borrow more from the Fed and lend less to the public. The money supply decreases. b borrow less from the Fed and lend less to the public. The money supply decreases. c borrow less from the Fed and lend more to the public. The money supply increases. d borrow more from the Fed and lend more to the public. The money supply increases.
Question 1 Which of the following Fed actions will increase bank lending? Select one or more answers from the choices shown. The Fed raises the discount rate from 5 percent to 6 percent. The Fed raises the reserve ratio from 10 percent to 11 percent. The Fed buys $400 million worth of Treasury bonds from commercial banks. The Fed lowers the discount rate from 4 percent to 2 percent. Note that Fed sets a discount rate that it charges to banks for short-term loans, which then contributes to the rate that the banks charge customers on their loans. While the Fed has the ability to issue Federal Reserve Notes, the paper currency used in the U.S. monetary system, they do not print the money. That task is still performed by the U.S. Mint. After the financial crisis of 2007-2008, Congress increased the Fed’s supervisory powers. Question 2 Describe tools that the US Treasury and the Federal Reserve use to undertake restrictive monetary policy today (versus before the mortgage-debt…
Which of the following will result when the Federal Reserve increases the reserve requirement? A. Banks will make fewer loans and the money supply will decrease. B. Banks will make fewer loans and the money supply will increase. C. Banks will make more loans and the money supply will increase. D. Banks will make more loans and the money supply will decrease.
Suppose our federal government finally decided to reduce the debt by increasing taxes. Fearful that this would bring down aggregate demand to much, the Federal Reserve might respond by. reducing the discount rate and increasing the money banks land Increasing the discount rate and decreasing the money banks lend. increasing the discount rate and increasing the money banks lead. reducing the discount rate and decreasing the money banks lend
Suppose that the Bank of Canada determines that the Canadian economy is currently overproducing. What can the Central Bank do to slow down economic activity? a. The Central bank can pursue an expansionary monetary policy by increasing the money supply, causing a decrease in the interest rate. As a result, real GDP will increase and the price level will increase. b. The Central bank can pursue a contractionary monetary policy by decreasing the money supply, causing a decrease in the interest rate. As a result, real GDP will decrease and the price level will decrease c. The Central bank can pursue a contractionary monetary policy by decreasing the money supply, causing an increase in the interest rate. As a result, real GDP will decrease and the price level will decrease. d. The Central bank can pursue a contractionary monetary policy by decreasing the money supply, causing an increase in the interest rate. As a result, real GDP will decrease and the price level will increase e. The…
3. Current structure of the Fed In the following table, use the selection menu to arrange the levels of power according to their positions in the power pyramid illustrating the struct of the Federal Reserve. Power position (From top to bottom) 1 2 3 4 Which of the following describe th The FOMC meets at lea The FOMC implements Level of power Member Banks Federal Reserve Banks The Congress Board of Governors The president The Chair ommittee (the FOMC)? Check all that apply. ew York City
34) A decision by the Fed to raise the discount rate (rate at which Fed lends to banks) will: a) increase output by raising the money supply and lowering the interest rate b) decrease output by lowering the money supply and raising interest rates c) decrease output by raising the money supply and raising interest rates d) increase output by lowering the money supply and raising interest rates
The US federal government gets most of its revenue from: a the discount rate b the prime rate c the federal funds rate d the US Treasury bills rate
If the central bank increases the discount rate it charges when it makes loans to banks, then the monetary base will fall and money supply will also fall fall and the money supply will rise rise and the money supply will fall rise and the money supply will rise