contestada

The discount rate is the interest rate on loans that the Federal Reserve makes to banks. Banks occasionally borrow from the Federal Reserve when they find themselves short on reserves. A lower discount rate __________ [increases or decreases] banks' incentives to borrow reserves from the Federal Reserve, thereby __________ [increasing or reducing] the quantity of reserves in the banking system and causing the money supply to __________ [fall or rise].

Respuesta :

Answer:

Increases

Increasing

Rise

Explanation:

When the discount rate ,which is the interest rate is lowered , the banks will be motivated to borrow more money as the cost to them is lower and there is also the opportunity of the bank charging a good interest to their customers.

This will lead to increased quantity of reserves in the banks and also a rise in the overall supply of money in the economy  as the banks will have enough funds to give loans to customers .

Otras preguntas