Which of the following would reduce short term interest rates?
A) the issuance of new government bonds by the central bank
B) a sale of bonds by the central bank
C) an increase in discount window lending
D) an increase in reserve requirements
E) a tighter credit policy by banks

Question

Quizplus · Accepted Answer

Increasing discount window lending means the central bank is making it easier for banks to borrow money, which would increase the money supply and decrease short term interest rates.

Answer: B
 A sale of bonds by the central bank would reduce the money supply, which would increase short term interest rates.

Therefore, the best choice is C.

Which of the Following Would Reduce Short Term Interest Rates