Attempts $$ Do No Harm $0\mathrm{.}8/1$

$7.$ The discount rate and the federal funds rate

The Federal Reserves establishes the interest rate charged on funds it loans to banks and other financial institutions. A higher interest rate reduces $q,$ the incentive to borrow funds from the Federal Reserve, thereby the quantity of reserves in the banking system, which causes the money supply to $q,.$

When the Federal Reserve loans more funds to banks and another financial institutions, the quantity of reserves in the banking system

$$ and the money supply $$