If the central bank can act as a lender of last resort during a banking panic, banks can
A) encourage the public to borrow directly from the central bank, and this will worsen the banking panic.
B) satisfy customer withdrawal needs and eventually restore the public's faith in the banking system.
C) borrow more and more money from the central bank, and this will lower its reserves and decrease the public's faith in the banking system.
D) call in their loans to their customers and eventually restore the public's faith in the banking system.
Question 2
In which of the following situations might you expect expansionary monetary policy to reduce the unemployment rate?
A) if changes in monetary policy are unanticipated B) if expectations are rational
C) if actual inflation is lower than expected D) if actual inflation is higher than expected
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