Question

The function of the central bank as a lender of last resort means that when all other sources fail, A. the consumer can always borrow money from the central bank B. the government can ask the central bank to print more money C. Commercial banks seek for loans from the central bank D. Commercial bank can deposit money with the central bank

Answer 1

Answer:

The Central Bank can act as a lender of last resort to prevent the government from suffering a liquidity shortage and failing to meet is short-term spending commitments. Suppose a government is largely solvent. Only 3% of its tax revenues are devoted to interest payments, and public sector debt is around 60-70% of GDP.Feb