By acting as a lender of last resort, the central bank:
A)prevents a loss of confidence in banks and avoids bank runs.
B)keeps interest rates high so that spending increases.
C)increases the amount of reserves that a bank is required to hold.
D)may keep inflation low but will likely drive unemployment up.

Question

Quizplus · Accepted Answer

By acting as a lender of last resort, the central bank can provide emergency funds to banks that are facing a liquidity crisis, preventing a loss of confidence in these banks and avoiding bank runs. This helps to maintain economic stability and confidence in the banking system.

By Acting as a Lender of Last Resort, the Central