Which of the following fed actions will increase bank lending?
instructions: you may select more than one answer.
a. the fed raises the discount rate from 5 percent to 6 percent.
b. the fed lowers the discount rate from 4 percent to 2 percent.
c. the fed raises the reserve ratio from 10 percent to 11 percent.
d. the fed buys $400 million worth of treasury bonds from commercial banks.

B and D

Explanation:

A discount rate is the interest rate the Fed charges commercial banks when they borrow money from it. Commercial banks may borrow from the fed to meet the reverse requirement and sometimes to issue loans.  The discount rate is directly related to the interest rates that banks charge customers. If the Fed lends to commercial banks at a high rate, the banks' charges customer a higher rate.  A low discount rate means lower interest rate hence affordable loans.

When the Fed buys securities from commercial banks, it injects money in commercials banks. The Feb will be increasing the money available to commercial banks to lend out. When the Fed buys securities from commercial banks is referred to as open-market-operation.

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