A reduction in the discount rate
A. Increases the cost of borrowing reserves from the Federal Reserve.
B. Discourages banks from borrowing reserves from the Fed.
C. Is consistent with a tight monetary policy.
D. Signals the Federal Reserve's desire for additional credit expansion.
Answer: D
You might also like to view...
Under the gold standard system, if the par exchange rate is $1 = 2 pounds, but the market exchange rate in the United Kingdom is $1 = 1 pound, then a person interested in arbitrage would:
A) buy dollars in the United Kingdom to be shipped to the United States and exchanged for a larger quantity of gold. B) find that it is not possible to engage in arbitrage. C) convert dollars into pounds in the United States and sell it for gold in the United Kingdom. D) lose money by trying to exploit any price difference.
The demand for loanable funds curve shifts in response to changes in
A) the amount of household savings. B) the expected future disposable income. C) expected profits. D) the real interest rate. E) wealth.