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Economics
MEDIUM
ENGLISH
Economics
Assume that commercial banks are holding excess reserves because business firms and consumers are not willing to borrow money A decrease in the discount rate is likely to ?
A
increase the money supply because it is now cheaper for banks to borrow from the central bank
Option A
B
decrease the money supply because it will now be more expensive for business firms and consumers to borrow money
Option B
Not change the money supply because banks already have excess reserves they cannot lend
Correct answer
D
Decrease the money supply because it is now cheaper for banks to borrow from the central bank instead instead of buying government securities
Option D
Correct answer: C
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