Reserves increase if the Federal Reserve
A)raises the discount rate or auctions more credit.
B)raises the discount rate but not if it auctions more credit.
C)lowers the discount rate or auctions more credit.
D)lowers the discount rate but not if it auctions more credit.

Question

Quizplus · Accepted Answer

Lowering the discount rate makes borrowing cheaper for banks, encouraging them to borrow more, which increases reserves. Auctioning more credit also increases reserves by providing more funds to banks.

Reserves Increase If the Federal Reserve