In the context of monetary policy, which of the following statements is true of the discount rate?
A) The Fed increases it during recessions.
B) When the Fed reduces it, interest rates on bank loans tend to fall.
C) When the Fed increases it, banks can obtain funds at a lower cost.
D) It is the interest rate that the Fed charges on its loans to individuals.

Question

Quizplus · Accepted Answer

When the Fed reduces the discount rate, it lowers the cost for banks to borrow money, which typically leads to lower interest rates on bank loans.

In the Context of Monetary Policy, Which of the Following