If the Fed fears an economic downturn, it would be most likely to
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

Lowering the discount rate makes borrowing cheaper for banks, encouraging them to provide more loans, which can stimulate economic activity.

If the Fed Fears an Economic Downturn, It Would Be