Which of the following best explains why raising the discount rate affects the
money supply?
O
A. When the discount rate is high, banks are able to charge lower
interest rates so that more people can afford to take loans.
O
B. When the discount rate is high, banks keep more reserves on hand
to avoid paying a lot to borrow from the Fed.
O
C. When the discount rate is high, banks have less incentive to give
loans because they make less profit on these loans.
D. When the discount rate is high, banks can loan out a larger portion
of their reserves.