Reserves decrease 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

Raising the discount rate makes borrowing from the Fed more expensive, which can decrease reserves as banks may borrow less. Auctioning more credit typically increases reserves, not decreases them.

Reserves Decrease If the Federal Reserve