A decrease in the discount rate ________ bank reserves and ________ the money supply if banks respond appropriately to the change in the rate.

Question

Quizplus · Accepted Answer

A decrease in the discount rate lowers the cost for banks to borrow money from the central bank, which typically leads to an increase in bank reserves. As banks have more reserves, they can lend more, thereby increasing the money supply.

A Decrease in the Discount Rate ________ Bank Reserves and ________

A Decrease in the Discount Rate Bank Reserves and