A decrease in the discount rate
A) reduces the cost of borrowing from the Fed.
B) signals the Fed's desire to decrease the money supply.
C) signals the Fed's desire to reduce lending to commercial banks.
D) increases the cost of reserves borrowed from the Fed.

Question

Quizplus · Accepted Answer

A decrease in the discount rate reduces the cost of borrowing from the Fed, making it more attractive for banks to borrow from the Fed and increasing the money supply.

A Decrease in the Discount Rate