By Acting as a Lender of Last Resort During a Banking

question 80

Multiple Choice

By acting as a lender of last resort during a banking panic,a central bank allows commercial banks to

• A) encourage the public to borrow directly from the central bank, taking pressure off the banking system.
• B) satisfy customer withdrawal needs and eventually restore the public's faith in the banking system.
• C) call in their loans to their customers and eventually restore the public's faith in the banking system.
• D) make additional loans to increase the assets on their balance sheets.

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Definitions:

Oil Deposit

A natural reservoir beneath the Earth's surface filled with crude oil.

Fixed Asset Turnover

A financial ratio indicating how efficiently a company uses its fixed assets to generate sales.

Double-Declining-Balance Method

The double-declining-balance method is an accelerated depreciation technique that writes off a larger portion of an asset's value early in its useful life, decreasing over time.

Residual Value

It is the estimated amount that an asset is expected to realize at the end of its useful life after deducting all costs associated with its disposal.