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

Question

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The lender of last resort function of the Bank of Canada means that it provides loans to commercial banks if the banking system as a whole is short of reserves. This is done to prevent widespread bank failures and to ensure the stability of the financial system. The loans are usually short-term, and the banks need to provide sufficient collateral to support the loan. The Bank of Canada sets the interest rate for these loans, which is called the overnight rate. Therefore, the best choice is D.

The Bank of Canada Is the Lender of Last Resort