Everything else held constant,in the market for reserves,when the federal funds rate is 3%,raising the discount rate from 5% to 6%
A)lowers the federal funds rate.
B)raises the federal funds rate.
C)has no effect on the federal funds rate.
D)has an indeterminate effect on the federal funds rate.

Question

Quizplus · Accepted Answer

The discount rate is above the federal funds rate, so banks are not borrowing from the Federal Reserve at the discount rate. Therefore, changing the discount rate does not affect the federal funds rate.

Everything Else Held Constant,in the Market for Reserves,when the Federal