When the Federal Reserve decreases the discount rate,the quantity of reserves increases and the money supply increases.

Question

Quizplus · Accepted Answer

When the Federal Reserve decreases the discount rate, it becomes cheaper for banks to borrow from the Fed, which leads to an increase in the quantity of reserves in the banking system. As a result, banks can lend out more money, which increases the money supply in the economy.

When the Federal Reserve Decreases the Discount Rate,the Quantity of Reserves