If the Fed wanted to act to increase borrowing by firms and consumers and thus hopefully reduce unemployment,it would

Question

Quizplus · Accepted Answer

By decreasing the interest rate on loans to member banks, the Fed creates an incentive for banks to offer lower interest rates on loans to consumers and firms. This in turn should encourage more borrowing, which can stimulate spending and investment, potentially leading to reduced unemployment. Selling securities or raising the reserve rate could potentially have the opposite effect by reducing the money supply and increasing borrowing costs. Increasing the interest rate on loans to member banks could also discourage borrowing. Encouraging people to save more and spend less may have long-term benefits but is unlikely to have a significant immediate impact on borrowing and unemployment.

If the Fed Wanted to Act to Increase Borrowing by Firms