A sign that the Federal Reserve is moving to lower interest rates would be
A) a reduction in bank reserves.
B) an increase in margin requirements.
C) a widening gap between the Treasury bill yield and the discount rate.
D) a narrowing gap between the Treasury bill yield and the discount rate.

Question

Quizplus · Accepted Answer

A narrowing gap between the Treasury bill yield and the discount rate indicates that the Federal Reserve is lowering interest rates. This is because the discount rate is the interest rate at which banks can borrow from the Federal Reserve, so a narrower gap means that banks can borrow money more cheaply, which leads to lower interest rates in the overall economy.

A Sign That the Federal Reserve Is Moving to Lower