Which of the following actions is LEAST likely to be undertaken by the Federal Reserve to encourage borrowing?

Increasing interest rates is least likely to encourage borrowing because higher interest rates generally lead to more expensive loans. When interest rates rise, the cost of borrowing also increases, which can deter individuals and businesses from taking out loans for things like purchasing homes, financing business expansion, or acquiring consumer goods.

In contrast, lowering reserve requirements, decreasing the discount rate, and buying government bonds are all actions that the Federal Reserve typically employs to encourage borrowing. Lower reserve requirements free up more funds for banks to lend, decreasing the discount rate makes borrowing from the Federal Reserve cheaper for banks, and buying government bonds injects liquidity into the economy, making money more accessible. These actions are aligned with boosting economic activity through increased lending.