What would be the impact of a decision by the Federal Reserve to raise the discount rate or raise the reserve requirement for banks?
A. a change in taxation
B. a change in fiscal policy
C. a tightening of money
D. a loosening of money
Answer (2)
Raising the discount rate or reserve requirement by the Federal Reserve typically results in a tightening of the money supply. This leads to higher borrowing costs and reduced financing availability for consumers and businesses. Such measures are implemented to control inflation and stabilize economic growth. ;
The Federal Reserve raising the discount rate or reserve requirement typically results in a tightening of the money supply, making it more difficult for consumers and businesses to borrow money. This is done primarily to control inflation and maintain sustainable economic growth. Therefore, the correct answer is C.
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