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Question
Which of the following is/are the function(s) of central bank.
Options
Banker's bank
Lender of the last resort
Receive deposits from the public and business firms.
Provide short-term and medium-term loans to customers.
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Solution
Banker's bank and lender of the last resort
Explanation:
- The central bank acts as a banker to all the commercial banks in the country.
- Whenever a commercial bank needs financial assistance, it may borrow from other commercial banks. However, other commercial banks may not be able to provide funds to the bank in need. In this way the central bank acts as the lender of the last resort.
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