ECONOMICS
FEDERAL RESERVE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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your local bank
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nowhere
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Federal Reserve Bank
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none of the above
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Detailed explanation-1: -The Federal Reserve, or other central bank, typically acts as the lender of last resort to banks that no longer have other available means of borrowing, and whose failure to obtain credit would dramatically affect the economy.
Detailed explanation-2: -“Lending of last resort” is one of the key powers of central banks. As a lender of last resort, the Federal Reserve (the “Fed”) famously supports commercial banks facing distressed liquidity conditions, thereby mitigating destabilizing bank runs.
Detailed explanation-3: -What is the lender of last resort ? The Fed is the lender of last resort because if a bank does not have enough reserves and other banks won’t loan to them the banks last option or last resort is to go to the fed.
Detailed explanation-4: -(T/F) When the Federal Reserve acts as a lender of last resort, it is making sure that banks have the money they need to continue to operate. True; Banks in trouble can borrow from the Federal Reserve.
Detailed explanation-5: -The correct answer is B) Discount loans; Sources.