Home » When the Federal Reserve raises the discount rate, it: makes it more attractive for banks to borrow money from the Federal Reserve and loan more…

When the Federal Reserve raises the discount rate, it: makes it more attractive for banks to borrow money from the Federal Reserve and loan more…

When the Federal Reserve raises the discount rate, it:  

makes it more attractive for banks to borrow money from the Federal Reserve and loan more money to their customers. This expands the money supply.

makes it less attractive for banks to borrow money from the Federal Reserve and loan more money to their customers. This expands the money supply.

makes it less attractive for banks to borrow money from the Federal Reserve and loan more money to their customers. This reduces the money supply.

makes it more attractive for banks to borrow money from the Federal Reserve and loan more money to their customers. This reduces the money supply.

If the Federal Reserve system injects $1 million of newly printed money into the economy (for example, by loaning $1 million to a commercial bank, which plans to loan this amount to its customers), then:

The nation’s total money supply does not change, because the money is simply a transfer of funds from one bank (The Fed) to another bank (the commercial bank).

The nation’s total money supply increases by a multiple of 1 million, if banks loan out as much as they are allowed to loan out and bank customers deposit all their funds.

The nation’s total money supply increases by $1 million, if all the money is loaned out by the commercial bank.

The nation’s money supply increases by 90% of $1 million, if the reserve requirement is 10%.

None of the listed answers is correct.

According to the our text, which of the following is a correct economic analysis regarding the function of money?

Money is the root of all evil. Without money, we will have no robberies or thefts.

Money is not the root of all evil. Without money, there will still be evil people, who will steal goods and services instead of money.

Money is not the root of all evil. The Federal Reserve does not back money with gold, so money has no true worth.

Money is the root of all evil, because most of the time thieves and robbers are out to steal people’s money.







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