Question

9. An increase in the discount rate ________ bank reserves and ________ the money supply if banks respond appropriately to the change in the rate.

22. Typically, a bank's largest asset is its

a. reserves.

b. holdings of securities.

c. deposits of its customers.

d. loans.

Answer 1

9

Discount rate is the rate at which Federal reserve Bank which is the Central Bank of United States lends to the other commercial banks

if the discount rate is increased then there will be less Bank reserves available because they will be available for lending and it will lead to increase the money supply in the banks

Opposite to it is when there is decrease in the discount rate

Answer 1-decrease the reserves

Answer 2-increase the money supply

22.

For a bank, its biggest asset is the loans which it has taken from different customers and businesses and the biggest liability for the bank is the the deposits because this has to be returned by the bank with higher interest rates

so the correct answer here is option d