Question

The Fed can directly protect a bank during a bank run by

		increasing the reserve requirement
		increasing the interest paid on reserves
		acting as a lender of last resort
		selling government bonds to the bank

Answer 1

Acting as a lender of last resort

A bank run occurs when more customers withdraws their money from the bank because they think that the bank may become insolvent in near future. So when banks fail to meet their financial requirements from other resources, they approach the Fed to give loans and advances as a lender of last resort. Fed assist these banks through discounting of approved securities and bills of exchange. So the Fed can directly protect a bank during bank run by acting as a lender of last resort.