# Assume that commercial banks are holding excess reserves because business firms and consumers are not willing to borrow money A decrease in the discount rate is likely to ? with Answer - Economics Mcqs | TestPrep

> Solved MCQ: Assume that commercial banks are holding excess reserves because business firms and consumers are not willing to borrow money A decrease in the discount rate is likely to ? Correct Answer: C. Not change the money supply because banks already have excess reserves they cannot lend. Verified answer explanation for FPSC, PPSC, MDCAT, NTS, and CSS competitive exam preparation.

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# Assume that commercial banks are holding excess reserves because business firms and consumers are not willing to borrow money A decrease in the discount rate is likely to ?

Direct Answer & Quick Reference

The correct option is **C. Not change the money supply because banks already have excess reserves they cannot lend**.

A. increase the money supply because it is now cheaper for banks to borrow from the central bank

B. decrease the money supply because it will now be more expensive for business firms and consumers to borrow money

C. Not change the money supply because banks already have excess reserves they cannot lend **(Correct Answer)**

D. Decrease the money supply because it is now cheaper for banks to borrow from the central bank instead instead of buying government securities

✨ Explain with AI

Verified Key: C. Not change the money supply because banks already have excess reserves they cannot lend
Solved by 3,103+ students

Verified against official examination board answer keys and standard curriculum textbooks.

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