Question

If the Fed increases the discount rate, then Key Bank will increase its reserves. decrease its reserves. make more loans. A contractionary or tight monetary policy stimulates borrowing. reduces borrowing. lowers interest rates. Which of the following is an inaccurate statement about the banking system? Banks borrow from households in order to lend to investors. Banks are the critical link in the flow of capital from households to investors. Competition between private banks and the central bank is what limits interest rates Banks that engage in riskier lending activities may reduce their odds of facing a bank run if they raise the interest rates they pay to savers. reduce their holdings of US Treasuries keep more of their assets in reserves.

Answer 1

1)	When the Federal reserve (Fed) increase the discount rate,
	commercial banks have to pay a higher interest rate to borrow
	from the Federal reserve. The Key bank will borrow less once the
	Fed raises the discount rate.
	increase its reserves.
2)	A contractionary monetary policy is a policy in which interest
	rates are raised so borrowing becomes more expensive and the
	money supply decreases.
	reduces borrowing.
3)	Competition between private banks and the central bank is what limits
	interest rates.
4)	keep more of their assets in reserves.