If the Federal Reserve lowers the discount rate, ceteris paribus (all else being equal), the equilibrium levels of funds lent will and the equilibrium level of real interest rates will .

If the Federal Reserve lowers the discount rate, ceteris paribus (all else being equal), the equilibrium levels of funds lent will increase and the equilibrium level of real interest rates will decrease.

Explanation:

The Federal Reserve discount rate is how much the U.S. central bank charges its member banks to borrow from its discount window to maintain the reserve it requires. In the U.S., the money supply is influenced by supply and demand—and the actions of the Federal Reserve and commercial banks.

The Federal Reserve sets interest rates, which determine what banks charge each other to borrow money, what the Federal government charges banks to borrow money and what the consumer has to pay to borrow money. All else being equal, a larger money supply lowers market interest rates, making it less expensive for consumers to borrow. Conversely, smaller money supplies tend to raise market interest rates, making it pricier for consumers to take out a loan. The current level of liquid money (supply) coordinates with the total demand for liquid money (demand) to help determine interest rates.

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