If the Central Bank Can Act as a Lender of Last

question 41

Multiple Choice

If the central bank can act as a lender of last resort during a banking panic,banks can

• A)call in their loans to their customers and eventually restore the public's faith in the banking system.
• B)satisfy customer withdrawal needs and eventually restore the public's faith in the banking system.
• C)borrow more and more money from the central bank,and this will lower its reserves and decrease the public's faith in the banking system.
• D)encourage the public to borrow directly from the central bank,and this will worsen the banking panic.

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Definitions:

M'Naghten Rule

A legal principle stating that a person cannot be held responsible for a crime if they were unaware of what they were doing or did not know it was wrong due to a mental disorder.

Durham Rule

A legal standard used to determine criminal liability, stating a defendant is not responsible if an unlawful act is the product of mental disease or defect.

Antisocial Conduct

Behavior that is hostile, aggressive, or damaging to societal relationships and rules.

Mental Disorder

A condition characterized by disturbances in thought, behavior, or emotions, leading to significant distress or impairment.