Praxis II Citizenship

Answer: D - If the Federal Reserve lowers the discount rate, commercial banks will borrow more from their regional Federal Reserve lending institutions and provide more or larger loans to their commercial consumers. The discount rate is the interest rate that the Federal Reserve charges commercial banks for borrowing money. If the discount rate goes down, commercial banks will borrow more so that they can increase their loans, since they make their money off of the interest they charge their consumers (more or larger loans means more interest).