2
QuizMultiple Choice

Monetary Policy: The Federal Reserve

Question 2 • IL-Economics

Why is the Fed often referred to as a “lender of last resort,” or the last lender to turn to in a crisis?

Answer
A
It lends consumers money when other banks will not.
B
It keeps all failing banks afloat to avoid economic disruption.
C
It helps finance and stabilize central banks internationally.
D
It offers banks financial protection to keep consumers from panicking.

Explanation

The Fed acts as a lender of last resort by providing emergency loans to banks that cannot obtain funds elsewhere. This can help banks meet withdrawals and maintain confidence, reducing the risk of panic spreading among consumers. It does not keep every failing bank afloat, so choice B is too broad; choice D is the closest match.

AI-written and checked against the verified answer.

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