For a Lender of Last Resort to Be Effective

question 85

Multiple Choice

For a lender of last resort to be effective

• A)it must operate in an economic environment of low interest rates.
• B)its promise to lend to banks during a crisis must be credible and carried out quickly.
• C)the banks it lends to cannot be illiquid.
• D)the economy must not experience periods of recession.

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Definitions:

Concrete Operational

A stage in Piaget's theory of cognitive development during which children gain the ability to think logically about concrete events.

Formal Operational

The final stage in Piaget's theory of cognitive development, beginning around age 11, where individuals gain the ability to think abstractly and logically about hypothetical situations.

Prefrontal Cortex

The front part of the frontal lobes of the brain, involved in complex behaviors such as planning, decision making, and moderating social behavior.

Amygdala

A component of the brain's limbic system involved in emotion regulation, decision-making, and memory processing, particularly known for its role in fear responses.