A central bank can help stop a bank panic by

Question

Quizplus · Accepted Answer

Acting as a lender of last resort is the best choice because it provides emergency liquidity to banks that are facing a run, which can help to restore confidence in the banking system and prevent the panic from spreading further. Raising the required reserve ratio or calling in consumer loans could exacerbate the panic by reducing the amount of available funds and increasing the number of distressed borrowers. Decreasing income taxes may provide short-term relief to consumers and businesses, but it is unlikely to address the underlying cause of the panic or prevent it from recurring in the future.

A Central Bank Can Help Stop a Bank Panic by