in 100 words or more, write a peer response at a college sophomore level to the following passage:

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Discuss the Fed's role as lender of last resort.

In times of panic or financial crisis, the Federal Reserve gives banks or other financial institutions emergency funding when no one else is willing to lend to them. This keeps banks from going bankrupt.

Why is it important?

Without this function, a single bank collapse would set off a series of bank failures, sometimes known as a "bank run," destabilizing the whole economy. It gives financial markets and the general public confidence that cash availability, or liquidity, will not entirely disappear during emergencies. It contributes to the preservation of trust in the financial system, which is necessary for the economy to run smoothly.

What is its purpose?

Its purpose is to keep the financial system stable in times of crisis and to guarantee that banks can accommodate depositors' unexpected withdrawal requests. Its purpose is alsoto shield individuals, companies, and the economy as a whole from the repercussions of financial panic. The Fed controls banks' borrowing rates, reserve ratios, and open-market activities, all of which are vital to the upkeep of the financial system. The interest rate charged to banks, known as the discount rate, is reduced to minimize borrowing costs and provide immediate access to emergency cash. Reserve ratios are designed to maintain banks' reserves, which can be reduced in times of crisis to increase lending capacity. By assuring money supply stability and preserving trust in the financial system, these instruments assist the Fed in its function as lender of last resort. By maintaining stability and avoiding minor issues from turning into major national economic disasters, the Fed serves as a safety net for the financial system.