Chapter 32, Problem 4P

To determine

Concept Introduction:

Financial Crisis: When there is an excessive loss in the nominal value of assets then the situation is termed as financial crisis. The major financial crisis after the great depression of 1920 occurred in 2008.

Banking Crisis: It is generally a crisis in the banking sector that causes recession in the economy. Recession in economy is caused by banking crisis. During these periods some of the major banks of economy go bankrupt. As a result, government intervention is required. Such crisis leads to huge unemployment and decrease in the real GDP.

Lender of Last Resort: The Central bank of any economy is referred tonas lender of last resort. In case any bank does not get loans from fund market or is about to bankrupt then it provides loans to the bank so that it can recover from the crisis.