If the lender of last resort function of the government is to be effective in working to minimize a crisis, it must be:
A)Reserved only for those banks that are most deserving
B)Used on a limited basis
C)Credible, with banks knowing they can get loans quickly
D)Only available during economic downturns

Question

Quizplus · Accepted Answer

For the lender of last resort function to be effective in minimizing a crisis, it must be credible, such that banks have confidence in quick access to loans. This helps to prevent bank runs and stabilizes the financial system. Using it on a limited basis or only during economic downturns can limit its effectiveness, and reserving it only for the most deserving banks can be difficult to determine in practice.

If the Lender of Last Resort Function of the Government