The Existence of a Lender of Last Resort Creates Moral

question 113

Multiple Choice

The existence of a lender of last resort creates moral hazard for bank managers because:

• A)They have an incentive to take too much risk in their operations
• B)Officials are likely to undervalue the bank's portfolio of assets
• C)They are less likely to apply for a direct loan from the central bank
• D)Banks seek loans from the central bank only after exploring other options

---

Definitions:

Impaired Brain Functioning

Deterioration or abnormal functioning of brain processes, affecting cognitive abilities, emotional regulation, or physical coordination.

Representative Sample

A subset of a population that accurately reflects the members of the entire population.

Sociologists

Scientists who study human societies, covering a broad range of topics from social behavior, culture, to institutions and their development.

Sample

Any subset of units from a population that a researcher studies.