How can the Bank of Canada directly protect a bank during a bank run?
A) by increasing reserve requirements
B) by selling government bonds to the bank
C) by lending reserves to the bank
D) by increasing the overnight rate

Question

Quizplus · Accepted Answer

The Bank of Canada can directly protect a bank during a bank run by lending reserves to the bank, which can help the bank meet its liquidity needs and prevent it from running out of cash to meet the demands of its depositors. Increasing reserve requirements or selling government bonds to the bank may indirectly help strengthen the bank's financial position, but these actions may also reduce the bank's ability to lend and invest, which can have negative impacts on the broader economy. Increasing the overnight rate may be used by the Bank of Canada to manage inflation and stabilize the economy, but it is not a direct measure to protect a bank during a bank run.

How Can the Bank of Canada Directly Protect a Bank