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"the discount rate is the interest rate on loans that the federal reserve makes to banks. banks occasionally borrow from the federal reserve when they find themselves short on reserves. a lower discount rate banks' incentives to borrow reserves from the federal reserve, thereby the quantity of reserves in the banking system and causing the money supply to ."

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A lower discount rate increases banks incentives to borrow reserves from the Federal Reserve, thereby Increasing the quantity of reserves in the banking system and causing the money supply to rise.
The Federal Reserve is the central bank of America and it uses the interest rates to influence the economic condition of the society. these interests comes from the other commercial banks that borrow the money from the federal reserve which comes plainly by the cash deposits.

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