Question

D) Small-denomination certificates of deposits 49 49) What is the typical role of a central bank? A) It serves as a bank for the national treasury B) It serves as a lender of last resort. C) It regulates depository institutions. D) All of the above. 50) 50) Financial intermediation is best defined as the process by which A) liabilities are liquidated B) corporations issue new stock. C) financial institutions accept savings from savers and make loans to investors. D) inflation is controlled. 51) A business owner applies for a bank loan to launch a fairly low-risk 51) project. After receiving the loan, she cancels the low-risk project and instead uses the borrowed funds for a high-risk venture. This is an example of A) capital controls. C) financial intermediation. B) the transactions approach. D) moral hazard. 52) 52) which of the following is not a function of the Federal Reserve System? A) The Fed determines government spending and taxation policies. B) The Fed supplies the economy with fiduciary currency. C) The Fed holds reserves of depository institutions D) The Fed acts as fiscal agent for the United States Department of the Treasury 53) 53) It can be argued that the Federal Reserve's most important function is A) to provide for check collection and clearing. B) to regulate the money supply. C) to lend to risky customers. D) to set the legal, controlled consumer interest rates.

Answer 1

49) Option D. Central bank plays an important role in regulating the financial market by controlling the functions of commercial banks.

50) Option C. Intermediary by banks and other institutions works as a function of accepting deposits from those who save and advancing loans to those who need money.

51) Option D. These are a part of hidden behavior where people can indulge in practices that are previously not looked upon or are likely to be more risky now

52) Option A

53) Option B