An increase in the discount rate will lead to a decrease in the money supply.

Name: An increase in the discount rate will lead to a decrease in the money supply.
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Question

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When the discount rate increases, banks will borrow less from the central bank, which in turn reduces the money supply available to the economy. This is because banks have less incentive to borrow from the central bank and lend money to consumers and businesses. Hence, an increase in the discount rate leads to a decrease in the money supply.

An Increase in the Discount Rate Will Lead to a Decrease