Practice question · Select all that apply
Which are lessons modern central banks absorbed from the Depression?
Hints
- The lessons concern liquidity, the money supply, and deposits.
- One listed item is the very thing that was abandoned.
Show the answer
- A. Never allow the money supply to contract during recession
- B. Act as lender of last resort during panics
- C. Deposit insurance prevents bank runs
Why
Lender of last resort, money supply protection, and deposit insurance, all Depression lessons. Maintaining the gold standard is precisely what the Depression discredited.
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