Question

If the Federal Reserve raises the discount rate, what can consumers expect with
regard to the rate of interest banks charge for loans and pay out for deposits?
A. Banks will increase the interest they charge for loans and increase the interest they
pay out for deposits.
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B. Banks will increase the interest they charge for loans and decrease the interest they
pay out for deposits.
C. Banks will decrease the interest they charge for loans and decrease the interest they
pay out for deposits.
O Banks will decrease the interest they charge for loans and increase the interest they
pay for deposits.

Answer 1

Answer:

A. Banks will increase the interest they charge for loans and increase the interest they

pay out for deposits.

Explanation:

If the Fed raises interest rates, it increases the cost of borrowing, making both credit and investment more expensive. This can be done to slow an overheated economy