Typically, increasing the difference between the discount and federal funds rates causes

Question

Quizplus · Accepted Answer

When the difference between the discount and federal funds rates increases, banks may be more likely to borrow from the discount window rather than from each other. This increases the supply of available funds in the banking system, which decreases the demand for these funds and puts downward pressure on short-term interest rates. As a result, market interest rates are likely to increase.

Typically, Increasing the Difference Between the Discount and Federal Funds