Options for blanks are decrease OR increase The discount rate is the interest ra

Question

Options for blanks are decrease OR increase

The discount rate is the interest rate on loans that the Federal Reserve makes to banks. Banks occasionally borrow from the Federal Reserve when they find themselves short on reserves. A higher discount rate thereby banks' incentives to borrow reserves from the Federal Reserve, the quantity of reserves in the banking system and causing the money supply to The federal funds rate is the interest rate that banks charge one another for short-term (typically overnight) loans. When the Federal Reserve uses open-market operations to buy government bonds, the quantity of reserves in the banking systembanks' need to borrow from each iter , banks' need to borrow from each ' and the federal funds rate

Explanation / Answer

Ans:

1) Decrease, Decrease, Decrease

A higher discount rate decreases the banks incentive to borrow from federal reserve and decrease the quantity of of reserves which will decrease the money supply.

2) Decrease, Increase,Increase

The open market operations of federal reserves decreases the quantity of reserves in the banking system and it will increase the banks need to borrow from other banks and thereby increasing the federal funds rate.  

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