Question

Define the discount rate. Explain how raising the discount rate leads to a reduction in the money supply

Answer 1

If you have a discounted price and an original price, and you want to know the discount as a percentage, you can calculate the percentage discount using a formula that divides the discounted price by the original price and then subtracts the result from one.

the  formula to  calculate  discount rate  is

= 1-(discount_price/original_price)

as you can clearly see from the formula that when we increase discount rate the ratio between discount rate and original price increases and this increase in ratio leads the reduction in money supply