In the Event of a Sudden Loss in Confidence in the Ability

question 39

Multiple Choice

In the event of a sudden loss in confidence in the ability of the commercial banks to redeem deposits,the Bank of Canada would probably

• A)take over the operation of any banks in severe difficulties.
• B)lend reserves to the commercial banks.
• C)offer to sell government bonds to the chartered banks.
• D)suspend operation of the banking system until the panic subsided.
• E)impose severe financial penalties on the commercial banks by charging them interest at higher than the Bank rate.