Guys, please help for the following Turle/False/Uncertain statement:
If the central bank lowers the discount rate it charges commercial banks for short term loans, the monetary base will expand.
Cheers!
2007-02-26 02:43:06 · 4 answers · asked by luzsdavis 1 in Social Science ➔ Economics
True.
It is monetary policy based on the opportunity cost of capital. As the discount rate goes down, banks will tend to borrow more to lend in the market.
2007-02-26 02:53:21 · answer #1 · answered by MSDC 4 · 0⤊ 0⤋
False. The monetary base has nothing to do with the rate of discount. Monetary base = debt of the central bank
2007-02-26 23:35:30 · answer #2 · answered by metalmario_mx 2 · 0⤊ 0⤋
True.
This is a classic example of loose monetary policy, or increasing the money supply. The lower rate allows banks to borrow more cheaply overnight and (slightly) expands the money supply by allowing banks to loan more money to consumers and businesses
2007-02-26 10:48:31 · answer #3 · answered by Yo, Teach! 4 · 0⤊ 0⤋
Not in an inflationary period.
2007-02-26 10:46:52 · answer #4 · answered by rico3151 6 · 0⤊ 1⤋