State whether the following statement is true or false AND explain why: "A decrease in the discount rate will always cause a decrease in the federal reserve funds rate."

Question

Quizplus · Accepted Answer

Since the discount rate is set above the federal funds rate,a decrease in the discount rate will only cause a decrease in the federal funds rate if the discount rate is decreased below the original federal funds rate level. If the decrease in the discount rate is such that the new rate is still above the federal funds rate,then the federal funds rate does not change,everything else held constant.

State Whether the Following Statement Is True or False AND Explain