\"When you hear on the news that the Federal Reserve is decreasing interest rate
ID: 2440388 • Letter: #
Question
"When you hear on the news that the Federal Reserve is decreasing interest rates, it is"
Reducing its discount rate.
Reducing the interest rate paid on bank reserves.
Reducing the legal rate at which banks lend to each other.
Reducing the rate of 90-day treasury bills.
Increasing the supply of money
Reducing its discount rate.
Reducing the interest rate paid on bank reserves.
Reducing the legal rate at which banks lend to each other.
Reducing the rate of 90-day treasury bills.
Increasing the supply of money
Explanation / Answer
If we carefully observe the LM equation then Money Supply is in opposite direction of interest rate therefore if interest rate decreases will increase the money supply
Option E is the correct response
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