If the fed raises the discount rate, reserves and the money supply will fall.
A discount or charge is the difference between the original amount of the current obligation and the amount that must be paid in the future to settle the obligation. Rebates are usually associated with a rebate rate, also called discount yield. A rebate is an amount or percentage discount on the normal retail price of a product or service. For example, you may be offered a $10 discount off the product's list price, or a 10% discount off the list price.
When a reduction in the amount is allowed to encourage more purchases or to get paid on time, it's called a discount. Discounts are categorized as follows: Trade discounts: Bulk purchase discounts are called trade discounts.
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