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

The correct answer to the statement: 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, is, C: Reduce the discount rate.

Step-by-step explanation:

The discount rate is defined as the minimum rate of interest, or the basis line of interest, which is applied to the loans that a central bank, such as the Federal Reserve, would lend to commercial banks. So, in order for more loans to be available for people, from commercial banks, these banks would need more capability to borrow from the Federal Reserve. To do this, the Fed. Reserve lowers the discount rate.

Answer 2

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 discount rate.