Answered

Find the best solutions to your questions at Westonci.ca, the premier Q&A platform with a community of knowledgeable experts. Discover solutions to your questions from experienced professionals across multiple fields on our comprehensive Q&A platform. Get detailed and accurate answers to your questions from a dedicated community of experts on our Q&A platform.

A higher Discount Rate tends to

A. increase
B. stabilize
C. decrease
D. none of the above

the price of loans because the overall supply of bank reserves tends to be smaller.

Sagot :

GinnyAnswer

Final answer:

An increase in the discount rate reduces the supply of credit, affecting loan availability and interest rates.


Explanation:

An increase in the discount rate reduces the supply of credit and therefore increases the real interest rate.

When the discount rate is higher, banks hold more excess reserves, lending out a smaller fraction of their deposits, resulting in a shift inward in the supply of credit. This leads to a decrease in the overall supply of bank reserves.

The Federal Reserve can influence interest rates by adjusting the discount rate, with higher rates leading to decreased loan availability and higher interest rates.


Learn more about Discount Rate and Supply of Credit in Economics here:

https://brainly.com/question/32569020


We appreciate your time. Please come back anytime for the latest information and answers to your questions. Thanks for using our platform. We aim to provide accurate and up-to-date answers to all your queries. Come back soon. Thank you for visiting Westonci.ca. Stay informed by coming back for more detailed answers.