If the Fed raises the discount rate, what will be the effect on the money supply?
A)It will decrease the money supply.
B)It will increase the money supply.
C)No change in the money supply
D)Not enough data to give an answer

Question

Quizplus · Accepted Answer

When the Fed raises the discount rate, it becomes more expensive for banks to borrow from the Federal Reserve. This leads to a decrease in the amount of reserves that banks have to lend out, which in turn decreases the money supply in the economy.

If the Fed Raises the Discount Rate, What Will Be