#1
Which of the following is a primary function of a central bank?
Conducting monetary policy
ExplanationCentral banks regulate money supply and interest rates to achieve economic goals.
#2
Who typically appoints the Governor of a central bank?
The Board of Directors
ExplanationGovernors are often appointed by the central bank's governing body, such as the Board of Directors.
#3
What is the main objective of a central bank's monetary policy?
To stabilize prices and control inflation
ExplanationMonetary policy aims to maintain price stability and control inflation for overall economic stability.
#4
Which of the following is not a tool used in monetary policy by central banks?
Foreign exchange rate
ExplanationWhile central banks influence exchange rates, it's not a direct tool in monetary policy implementation.
#5
What does the term 'Central Bank Independence' refer to?
The ability of central banks to set their own policies without interference from the government
ExplanationCentral bank independence ensures autonomy in policymaking, free from undue government influence.
#6
What is the role of a central bank in controlling inflation?
Raising interest rates
ExplanationCentral banks use interest rate adjustments to curb inflation by reducing spending and lending.
#7
Which central bank is known as the lender of last resort in the United States?
Federal Reserve
ExplanationThe Federal Reserve acts as a lender of last resort during financial crises, providing liquidity to banks.
#8
What is the primary goal of a central bank's supervision of commercial banks?
To maintain financial stability
ExplanationSupervising commercial banks ensures stability, preventing crises that could impact the broader economy.
#9
What is the term used to describe the minimum amount of reserves that banks must hold in proportion to their deposits?
Reserve ratio
ExplanationThe reserve ratio is the mandated percentage of deposits that banks must keep as reserves.
#10
What is the primary function of the Bank for International Settlements (BIS)?
Facilitating cooperation among central banks
ExplanationBIS fosters collaboration and coordination among central banks to enhance global financial stability.
#11
What does the term 'Open Market Operations' refer to in the context of central banking?
Buying and selling government securities
ExplanationOpen Market Operations involve buying and selling securities to control money supply and interest rates.
#12
In which year was the Federal Reserve System established in the United States?
1913
ExplanationThe Federal Reserve System was established in 1913 to address banking panics and promote stability.
#13
What is the primary tool used by central banks to communicate their monetary policy decisions?
Policy statements
ExplanationCentral banks use clear policy statements to communicate decisions, guiding market expectations.
#14
Which of the following central banks was the first to implement quantitative easing (QE) after the 2008 financial crisis?
Federal Reserve
ExplanationThe Federal Reserve was an early adopter of QE, using it to address the economic fallout from the 2008 financial crisis.
#15
What is the term for the simultaneous purchase and sale of securities to alter the money supply?
Operation twist
ExplanationOperation Twist involves buying and selling securities to influence interest rates and the money supply.