If the Fed raises the discount rate at the same time it conducts an open market sale,it follows that the money supply will
A) fall.
B) rise.
C) remain unchanged.
D) There is not enough information to answer the question.

Question

Quizplus · Accepted Answer

When the Fed raises the discount rate, it becomes more expensive for banks to borrow money from the Fed, which decreases the amount of reserves that banks hold. When the Fed conducts an open market sale, it sells government securities to banks which also reduces the reserves of banks. The combination of these actions would cause a reduction in the money supply.

If the Fed Raises the Discount Rate at the Same