in a recession, the Fed would most likely:
A. Restrict bank lending by lowering the discount rate
B. Encourage bank lending by lowering the discount rate
C. Encourage bank lending by raising the discount rate
D. Encourage bank lending by raising the federal funds rate
E. Restrict bank lending by raising the discount rate
B. Encourage bank lending by lowering the discount rate
During a recession, the Federal Reserve typically reduces interest rates to encourage borrowing and increase economic activity. Lowering the discount rate makes it cheaper for banks to borrow money from the Fed, which in turn allows them to lend more money to businesses and consumers. This helps stimulate economic growth and reduce the negative effects of a recession.