The stability of the financial system is enhanced by the ability of central banks to:

Question

Quizplus · Accepted Answer

Central banks can act as a lender of last resort during financial crises, which helps prevent bank runs and the collapse of multiple financial institutions. This enhances the stability of the financial system by providing a source of liquidity and preventing systemic risk. Providing loans to insolvent banks or converting poorly run banks into branches of the central bank may not necessarily enhance stability, and deposit insurance is typically provided by separate agencies.

The Stability of the Financial System Is Enhanced by the Ability