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lianna [129]
3 years ago
10

Suppose that, for every 1-percentage-point decline of the discount rate, commercial banks collectively borrow an additional $2 b

illion from Federal Reserve Banks. Also assume that the reserve ratio is 20 percent. If the Fed increases the discount rate from 4.0 percent to 4.25 percent, bank reserves will:
Business
1 answer:
almond37 [142]3 years ago
4 0

Explanation:

Decline by $0.5 billion and the money supply will decline by $2.5 billion.

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