The United States goes through a period of recession because of the continuous decrease in the nation's gross domestic product. The Fed intervenes and improves the situation by reducing the discount rate. This move by the Fed will result in:
A) banks obtaining funds at a lower cost.
B) a rise in the interest rates of bank loans.
C) individuals getting discouraged to borrow money and spend it.
D) a drop in the availability of loans to consumers.

Question

Quizplus · Accepted Answer

Reducing the discount rate lowers the cost for banks to borrow money from the Federal Reserve, encouraging them to obtain funds at a lower cost and potentially lend more to consumers.

The United States Goes Through a Period of Recession Because