The Bank of Canada is the lender of last resort.This means banks may borrow money from the Bank of Canada

Question

Quizplus · Accepted Answer

The lender of last resort function is to provide liquidity to the banking system as a whole, not just to individual banks. Option A may be true, but it is incomplete as banks may also borrow money for longer periods of time. Option B is incorrect as the purpose of borrowing from the Bank of Canada is not to replenish reserves, but rather to obtain liquidity. Option C is not a relevant reason as the Bank of Canada does not provide financing for the acquisition of overseas reserves. Option D is incorrect as borrowing from the Bank of Canada requires collateral, but it is not limited to securities.

The Bank of Canada Is the Lender of Last Resort