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Lender of Last Resort and Bank Liquidity Quiz
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Lender of Last Resort and Bank Liquidity Quiz

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Questions and Answers

What is the role of a lender of last resort?

  • To limit the funds available to struggling banks
  • To invest in struggling banks for profit
  • To offer loans to banks experiencing financial difficulty (correct)
  • To encourage customers to withdraw funds from struggling banks

    • Why do commercial banks usually try not to borrow from the lender of last resort?

  • It encourages customer confidence in the bank
  • It helps in profit maximization for the banks
  • It indicates the bank is experiencing a financial crisis (correct)
  • It is a requirement by the central bank

    • What is the purpose of the lender of last resort in preventing bank runs?

  • To invest in struggling banks to boost their profits
  • To limit the liquidity of all banks
  • To encourage panic withdrawals from struggling banks
  • To protect individuals who have deposited funds and prevent panic withdrawals (correct)

    • Which component of monetary economics concerns the proper definition of money and its demand and supply?

    <p>Monetary microeconomics</p> Signup and view all the answers

    What term describes non-cash assets that are highly liquid, such as savings accounts and Treasury Bills?

    <p>Near money</p> Signup and view all the answers

    What is the primary concern of monetary macroeconomics?

    <p>Formulation of monetary policy and its impact on the economy</p> Signup and view all the answers

    In a modern monetary economy, against what are virtually all exchanges of commodities among economic agents made?

    <p>Money</p> Signup and view all the answers

    Who is usually responsible for the formulation of monetary policy in a monetary economy?

    <p>Central bank or the monetary authority</p> Signup and view all the answers

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