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Advanced Placement (AP)Advanced Placement (AP)
7 February, 10:06

If the Federal Reserve increases the discount rate, how are interest rates and real GDP affected?

Interest Rates / Real GDP

A. Increase / Decrease

B. Increase / Increase

C. Decrease / Decrease

D. Decrease / Increase

E. Decrease / No change

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Answers (1)
  1. 7 February, 10:55
    0
    A decrease in the discount rate makes it cheaper for commercial banks to borrow money, which results in an increase in available credit and lending activity throughout the economy.

    Based on this statement, since a decrease, results in an increase, then your answer would be ...

    D. Decrease / Increase
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Home » Advanced Placement (AP) » If the Federal Reserve increases the discount rate, how are interest rates and real GDP affected? Interest Rates / Real GDP A. Increase / Decrease B. Increase / Increase C. Decrease / Decrease D. Decrease / Increase E. Decrease / No change
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