If there is a positive quantity of discount lending, the demand for reserves intersects the horizontal portion of the supply for reserves.

Question

Quizplus · Accepted Answer

The horizontal portion of the supply curve for reserves represents the discount rate. When there is a positive quantity of discount lending, it indicates that the demand for reserves has intersected this horizontal portion, as banks are borrowing at the discount rate.

If There Is a Positive Quantity of Discount Lending, the Demand