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Economics · Oct / Nov 2018 · Paper 12 · Question 8

2281Money and banking

A central bank acts as a lender of last resort especially in times of financial crisis. What is the purpose of this function?

  1. Ato cover credit card debts of consumers
  2. Bto provide liquidity to the banking system
  3. Cto remove failing banks from the financial system
  4. Dto safeguard the profits of the banking system

As printed in the paper

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Correct answer: B. to provide liquidity to the banking system

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