Suppose that the federal funds rate and the discount rate are equal initially at 3%. If the discount rate is then lowered to 2.5%, to whom will a bank be more likely to go for a loan: the Federal Reserve or another bank? Explain your answer in detail, and be sure to mention the impact that this situation would have on the money supply

When the Fed lowers the discount rate below the federal funds rate, it encourages banks to borrow reserves from the Fed. This would lead to an increase in reserves in the banking system. With more reserves, the bank can create more loans (more checkable deposits), and the result will be an increase in the money supply.