The Fed is engaging in __________ when it lends to commercial banks during emergencies to avoid insolvency.

Question

Quizplus · Accepted Answer

The Fed's role as lender of last resort involves providing loans to commercial banks during times of financial stress to prevent their insolvency. This action helps to maintain the stability of the financial system and prevent broader economic disruptions. This is a key function of the Fed's monetary policy. Open market operations involve the buying and selling of securities to influence interest rates, while policy directives refer to the formal guidance that the Fed sets for its monetary policy actions.

The Fed Is Engaging in __________ When It Lends to Commercial