The Board of Governors of the Federal Reserve holds a meeting to discuss its concern over the decreasing gross domestic product of the country. All members agree that the situation can be brought under control and the economy can be stimulated if they use the discount rate as a tool. In this scenario, the Fed is most likely to:

Question

Quizplus · Accepted Answer

The discount rate is the interest rate at which banks can borrow money from the Federal Reserve. By reducing the discount rate, the Fed can make it cheaper for banks to borrow, which can encourage them to lend more money to businesses and consumers. This increased lending can help stimulate economic activity and potentially increase GDP. Therefore, the most likely choice for the Fed in this scenario would be to reduce the discount rate.

The Board of Governors of the Federal Reserve Holds a Meeting