Central Banks

Question 1

Central Banks

Answer 1

A public institution that ensures both monetary and financial stability
- the exact responsibilities vary from one bank to another

Question 2

Issuing bank notes

Answer 2

• giving out bank notes which can only be done by the Central Bank of England

Question 3

Managing the country’s currency

Answer 3

• the Bank of England has foreign exchange reserves
• however, it is not as big of responsibility now as have a floating exchange rate and not fixed

Question 4

Maintaining monetary responsibility

Answer 4

• the monetary policy committee is in charge of voting whether interest rates should decrease or increase to keep within the symmetric inflation target

Question 5

Maintaining financial stability

Answer 5

• entails that payment systems run smoothly and people can trust these payment systems
• one system is the clearing house automated system, where you can get money on the same day

Question 6

Banker to government

Answer 6

• The Bank of England checks and has oversight of tax revenue and government spending to see if it can inform their own decisions
• if gov is taking part in contractionary fiscal policy, Bank of England reduces interest rates to support this

Question 7

Banker to commercial banks

Answer 7

• the Bank of England is a trustful and credible institution

Question 8

Lender of last resort

Answer 8

• the Bank of England offers liquidity to financial institutions