When a commercial bank borrows from a Federal Reserve Bank

A) the supply of money automatically increases.
B) it indicates that the commercial bank is unsound financially.
C) the commercial bank's lending ability is increased.
D) the commercial bank's reserves are reduceD.

When a commercial bank borrows from a Federal Reserve Bank, it increases its reserves which in turn increases the lending ability of the bank. Therefore, choice C is the correct answer. Choice A is incorrect because borrowing from the Federal Reserve Bank does not automatically increase the supply of money. Choice B is incorrect because borrowing from the Federal Reserve Bank does not necessarily indicate that the commercial bank is unsound financially. Choice D is incorrect because borrowing from the Federal Reserve Bank increases the commercial bank's reserves, it does not reduce them.