Answer the following statements true (T) or false (F)

1) When the Fed raises the interest rate paid on reserves, it discourages bank lending.
2) When the Fed pays interest on reserves held at Fed banks, the interest rate used is the
discount rate.
3) The prime interest rate and the federal funds rate normally change in opposite directions.
4) The largest single liability of the Federal Reserve Banks is their outstanding loans to
commercial banks.

1) T
2) F
3) F
4) F