Consider how the following scenario would affect the money supply and, as a result, interest rates in the economy. a. when the federal reserve increases the discount rate, banks will borrow: 1) fewer reserves and decrease lending. 2) fewer reserves and increase lending. 3) more reserves and decrease lending. 4) more reserves and increase lending. b. this causes the money supply to: 1) increase 2) remain the same 3) decrease c. market interest rates to: 1) increase 2) remain the same 3) decrease