An increase in the discount rate produces a decrease in money supply.

Name: An increase in the discount rate produces a decrease in money supply.
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When the Fed increases the discount rate, the rate it charges member banks to borrow money, the result is a decrease in loans. Member banks must raise the interest rate they charge to customers, in order to cover the increase in what they had to pay to borrow the funds from the Fed.

An Increase in the Discount Rate Produces a Decrease in Money