Question

1. The discount rate is the:________. a. lowest interest rate that banks can charge for loans to their most creditworthy customers. b. interest rate at which banks can borrow reserves from the Federal Reserve. c. lowest interest rate that banks can charge for lending reserves to other banks or financial institutions. d. interest rate at which banks can borrow reserves from other banks. 2. If the Fed were to decrease the discount rate, banks will borrow:______. a. more reserves, causing an increase in lending and the money supply. b. fewer reserves, causing an increase in lending and the money supply. c. fewer reserves, causing a decrease in lending and the money supply. d. more reserves, causing a decrease in lending and the money supply.

Answer 1

Michelle needs to calculate the interest for the length of each loan. Bank A will charge $2430 in interest and Bank B will charge $1980 in interest. She will save by borrowing from Bank B.

Step-by-step explanation:

Answer 2

Answer(1)

b. interest rate at which banks can borrow reserves from the Federal Reserve

Step-by-step explanation:

The discount rate is known in America as the rate of interest which a central bank charges on its loans and advances to a commercial bank. This loans and advances are from the federal reserve.

Answer (2)

a. more reserves, causing an increase in lending and the money supply

Step-by-step explanation:

Excess lending from the national reserve due to a lowered discount rate will lead to a reserve supply excess into commercial banks throughout the economy and expands the money supply .