If there is a recession, the Fed would most likely:
A) encourage banks to provide loans by lowering the discount rate.
B) encourage banks to provide loans by raising the discount rate.
C) restrict bank lending by lowering the discount rate.
D) restrict bank lending by raising the discount rate.
E) restrict bank lending by lowering the federal funds rate.

Question

Quizplus · Accepted Answer

During a recession, the Fed typically wants to encourage economic growth by increasing spending and investment. To do this, they may lower the discount rate, which is the interest rate at which banks can borrow money from the Fed. This makes it cheaper and easier for banks to provide loans to individuals and businesses, stimulating economic activity.

If There Is a Recession, the Fed Would Most Likely