Question

When a central bank is acting as a lender of last resort, it is: A buying...

When a central bank is acting as a lender of last resort, it is:

A buying long-term Treasury bonds and selling short-term Treasury notes.

B providing banks with Treasury bills for free.

C buying Treasury bills directly from the public.

D providing banks with liquidity to meet their obligations.

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Answer #1

When a central bank is acting as a lender of last resort it is -

D) providing banks with liquidity to meet their obligations.

lender of last resort means providing loan to banks and other financial institution at that time when they are facing financial difficulty.Central bank is the bank of all bank hence when there is financial crises is arises then central bank can help to those bank by way of providing loan with liquidity to meet their obligation.hence central bank remove financial hurdel by giving loan to needy institution .

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