The central bank acts as lender of last resort when it
Correct answer: A. Provides emergency funds to solvent banks
- A. Provides emergency funds to solvent banks
- B. Collects income tax from households
- C. Sets prices for consumer goods
- D. Finances every private investment
Explanation
A lender of last resort supplies emergency liquidity to banks facing temporary funding problems, helping to prevent a wider banking panic. This role differs from tax collection and from directly financing all private investment.
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The economy is studied as a whole through national income, gross domestic product, inflation, unemployment, economic growth and business cycles. Coverage includes aggregate demand and supply, consumption and investment, money and banking, fiscal and monetary policy, exchange rates and balance of payments, which distinguishes macroeconomics from the study of individual markets.
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