the federal reserve increases the discount rate in order to:
A. Make banks more likely to lend money to customers.
B. Increase the overall money supply in the economy.
C. Encourage banks to increase their prime rates.
D. Make more treasury and securities available for sale.

The Federal Reserve (Fed) sets the interest rate on loans it makes to commercial banks and other depository institutions. This rate is known as the federal discount rate. Option C is correct: Encourage banks to increase their prime rates.

How the Federal Discount Rate Works ?

The Fed banks can lend directly to member banks and depository institutions in addition to its other monetary policy and regulatory tools.

As a lender of last resort, the Fed's principal goal is to ensure the stability of the banking system and the financial system as a whole.

Healthy banks are permitted to borrow as much as they like from the Fed's discount window at very short maturities (often overnight) in order to prevent unjustified bank collapses; this facility is known as a standing lending facility.

Typically, banks favour borrowing from one another in the overnight loan market.

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the federal reserve increases the discount rate in order to: A. Make banks more likely to lend money to customers. B. Increase the overall money supply in the economy. C. Encourage banks to increase their prime rates. D. Make more treasury and securities available for sale.

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How the Federal Discount Rate Works ?

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the federal reserve increases the discount rate in order to:
A. Make banks more likely to lend money to customers.
B. Increase the overall money supply in the economy.
C. Encourage banks to increase their prime rates.
D. Make more treasury and securities available for sale.