The Fed's Lender-Of-Last-Resort Function

question 23

Multiple Choice

The Fed's lender-of-last-resort function

• A)has proven to be ineffective.
• B)cannot prevent runs by large depositors.
• C)is no longer necessary due to FDIC insurance.
• D)creates a moral hazard problem.

---

Definitions:

LIBOR

The London Interbank Offered Rate, an interest rate average calculated from estimates submitted by the leading banks in London, used as a reference rate for lending and borrowing between banks.

Tokyo Interbank Rate

A benchmark interest rate at which banks lend to each other in the Tokyo interbank market.

Euribor

The interest rate at which banks lend to each other in euros, serving as an important benchmark for various financial instruments in the Eurozone.

FIFO

The first-in, first-out accounting method of inventory valuation.