Question

The Fed acts like a private banking institution when it

A. provides payment minus clearing services to depository institutions.

B. supplies the economy with fiduciary currency.

C.acts as the​ "lender of last​ resort."

D.regulates the money supply.

The Fed acts like a government agency when it

A.provides​ payment-clearing services.

B. acts as the​ government's fiscal agent.

C. regulates the money supply regulates the money supply.

D. holds a depository​ institution's reserves

Answer 1

The Fed acts like a private banking institution when​​​ it provides payment and clearing services to depository instituinstitutions which is like a private bank function, other options including money supply regulation ,lender of last resort, supplying fiduciary currency are the function which it undertakes as a Federal agency or government body to ensure overall well-being of the economy. Hence, option (a) is correct.

The Fed act like government agency when it regulates money supply.providing payment clearing is the function undertaken by private jnstitution alike, assisting government on fiscal space is also perform by other banks. Hence, option (c) is correct

​​​​​​