A reduction in the discount rate Group of answer choices Increases the cost of borrowing reserves from the Federal Reserve. Signals the Federal Reserve's desire for additional credit expansion. Is consistent with a tight monetary policy. Discourages banks from borrowing reserves from the Fed.
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The discount rate is the interest rate at which commercial banks can borrow funds from the Federal Reserve. It is a tool used by the Federal Reserve to influence the money supply and credit conditions in the economy. Show more…
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49. A decrease in the discount rate: A. reduces the cost of borrowing from the Fed. B. signals the Fed's desire to decrease the money supply. C. signals the Fed's desire to reduce lending to commercial banks. D. increases the cost of borrowing from the Fed.
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Which of the following Fed actions will increase bank lending? LO36.3 Select one or more answers from the choices shown. a. The Fed raises the discount rate from 5 percent to 6 percent. b. The Fed raises the reserve ratio from 10 percent to 11 percent. c. The Fed initiates reverse repos involving S10 billion worth of Treasury bonds with nonbank financial firms. d. The Fed lowers the discount rate from 4 percent to 2 percent.
Consider the market for reserves. Suppose that the Fed reduces the discount​ rate, that​ is, the interest rate it charges banks on the discount window for emergency loans. What happens to the federal funds rate if the reduction in the discount rate is very​ large, so that the discount rate gets arbitrarily close to the interest rate paid on​ reserves? A. The effect cannot be determined without additional information B. The federal funds rate increases C. The federal funds rate does not change D. The federal funds rate falls
Benjamin D.
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