ABorrowing from the Fed becomes more expensive for banks
BConsumer mortgage rates automatically fall
CThe money supply immediately increases
DTreasury bond yields fall
✓ Correct answer: A. Borrowing from the Fed becomes more expensive for banksThe discount rate is what the Fed charges banks for short-term loans at the discount window. Raising it makes emergency borrowing from the Fed more costly, encouraging banks to seek funds elsewhere and generally tightening credit.
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Theory