During an economic recession, raising the central bank's rediscount rate serves to expand credit creation by commercial banks and stimulate aggregate demand.
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The statement is False. Raising the rediscount rate is a contractionary monetary policy measure that makes borrowing more expensive, restricting credit expansion and lowering aggregate demand rather than stimulating economic activity.
The statement is false because increasing the rediscount rate is a contractionary monetary policy tool used to reduce money supply and control inflation. During a recession, the central bank would lower the rediscount rate to reduce lending rates, encourage borrowing, and boost aggregate spending.
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Rediscount Rate Policy and Economic Stabilization