Which of the following is an action of central banks and governments to lessen the severity of a banking crisis?
A)establishing shadow banks
B)guaranteeing bank deposits
C)encouraging asset bubbles
D)opening a liquidity trap

Question

Quizplus · Accepted Answer

Guaranteeing bank deposits is a common action taken by central banks and governments to increase confidence in the banking system and prevent runs on banks during a crisis. This helps to lessen the severity of the crisis by reassuring depositors that their funds are safe. The other options, such as establishing shadow banks, encouraging asset bubbles, and opening a liquidity trap, are not typical actions taken to address banking crises and may even exacerbate the situation.

Which of the Following Is an Action of Central Banks