Which of the following both decrease the money supply?
A)A decrease in the discount rate and a decrease in the interest rate on reserves
B)An increase in the discount rate and a decrease in the interest rate on reserves
C)A decrease in the discount rate and an increase in the interest rate on reserves
D)An increase in the discount rate and an increase in the interest rate on reserves

Question

Quizplus · Accepted Answer

An increase in the discount rate makes borrowing from the central bank more expensive for commercial banks, leading to a decrease in the money supply. Similarly, an increase in the interest rate on reserves encourages banks to hold more reserves instead of lending them out, which also decreases the money supply.

Which of the Following Both Decrease the Money Supply