Question

Everything else held​ constant, the vertical section of the supply curve of reserves is lengthened when the A. federal funds rate rises. B. federal funds rate falls. C. discount rate increases. D. discount rate decreases.

Answer 1

Answer: The correct answer is "C. discount rate increases.".

Explanation: If everything else held​ constant, the vertical section of the supply curve of reserves is lengthened when the discount rate increases.

This occurs because the discount rate is the interest rate at which the Central Bank is willing to lend reserves to commercial banks.