If the economy is in decline and the Federal Reserve wants to encourage banks to lend to consumers which type with the Fed likely take?
Encourage the sale of government securities decrease the discount rate increase the federal funds rate raise the prime rate

Question

If the economy is in decline and the Federal Reserve wants to encourage banks to lend to consumers which type with the Fed likely take?
Encourage the sale of government securities decrease the discount rate increase the federal funds rate raise the prime rate

anonymous · Answer

they want to encourage growth in lending so they want to decrease interest rates. 

A. If they sell securities this will remove money from circulation so the interest rate will rise! Not correct
C. If they increase the federal funds rate this is increasing the interest rate. Not correct
D. Another increasing interest rate answer.  Not correct

B is the only option that involves lowering an interest rate so B is correct!