Monetary Policy and Central Banking Quiz

Central banks use monetary policy to influence the money supply.

Monetary policy aims to achieve multiple objectives such as price stability, full employment, and economic growth.

Expansionary monetary policy involves purchasing government securities to increase the money supply.

Open market operations involve the buying and selling of government securities by the central bank to influence the money supply.

The discount rate is the rate at which commercial banks can borrow funds from the central bank to meet short-term liquidity needs.

Central banks use open market operations to adjust short-term interest rates by buying or selling government securities.

The discount rate is the interest rate at which the central bank lends money to commercial banks.

Central banks typically do not conduct fiscal policy, which is the domain of government.

Stagflation refers to a situation characterized by stagnant economic growth, high inflation, and high unemployment.

The lender of last resort is a central bank that offers emergency loans to financial institutions facing liquidity crises.

Consumer confidence is not directly influenced by monetary policy but can be indirectly affected by its impact on economic variables.

Forward guidance, though increasingly used, is considered an unconventional tool of monetary policy.