Question

The Federal Reserve wants to encourage banks to lend more money in order to increase the amount of money available. To do this, the Fed would __________.

-reduce the money supply
-raise the reserve ratio
-reduce the discount rate
-increase the discount rate

Answer 1

Are there any choices?

Answer 2

reduce the money supply
raise the reserve ratio
reduce the discount rate
increase the discount rate

Answer 3

First, what do you think the answer is?

Answer 4

increase the discount rate?

Answer 5

Well, the Federal Reserve uses discount rate to control monetary policy through bank borrowing. And during an economic recession, the Feds lower the discount rate.

Answer 6

so it would be that one?

Answer 7

I believe so

Answer 8

thank you.