The discount rate is the interest rate that the FEDs charge on loans of reserves

Question

The discount rate is the interest rate that the FEDs charge on loans of reserves to banks. The federal funds rate is the interest rate banks charge for overnight loans of reserves to other banks.
Which of the following is true. (select all that apply)
a) If the FED wants to contract monetary supply, it reduces the discount rate.
b) A lower Discount Rate discourages banks from borrowing reserves and making loans.
c) A higher Discount Rate discourages banks from borrowing reserves and making loans.
d) If the FED wants to expand the monetary supply, it reduces the discount rate.

Explanation / Answer

c and d

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