Question

If the Fed raises the discount rate, banks are _______ likely to keep excess reserves. Therefore, the supply of loanable funds would _________ and the real interest rate will ___________.

A. more; decrease; fall
B. more; increase; fall
C. less; increase; fall
D. more; decrease; rise

I'm posting a rather econ-related b/c no one is online on an econ group, but help me please!

Answer 1

2 hints:

1) If the federal reserve raises rates (hawkish), then banks receive more for depositing their excess cash reserves at the Fed, relative to putting them to more productive uses for some Clients. / If the federal reserve lowers rates (doveish), then banks receive less for depositing their excess cash reserves at the safety of the Fed....

2) the entire question can be determined from the last blank only. The Fed moves the discount rate for banks ---> when the Fed is trying to affect a move in the real interest rate in the economy.