A decrease in the discount rate _____ the interest rate that banks charge their customers, which leads to _____ in the total spending in the economy.

Question

Quizplus · Accepted Answer

A decrease in the discount rate typically lowers the cost of borrowing for banks, which can then pass on these lower costs to their customers by charging lower interest rates. Lower interest rates generally encourage borrowing and spending, leading to an increase in total spending in the economy.

A Decrease in the Discount Rate _____ the Interest Rate