When the Fed lowers the discount rate, it makes it
A) cheaper for banks to borrow from each other.
B) cheaper for banks to obtain additional reserves by borrowing from the Fed.
C) more difficult for banks to accept deposits.
D) more difficult for banks to extend loans.

Question

Quizplus · Accepted Answer

When the Fed lowers the discount rate, it becomes cheaper for banks to obtain additional reserves by borrowing from the Fed. This increases the money supply and makes it easier for banks to extend loans to borrowers.

When the Fed Lowers the Discount Rate, It Makes It