Central banks

Question 1

What are the functions of central banks?

Answer 1

• Maintaining the stability of the financial system and containing systemic risk in financial markets
• Achieve central bank aims
• Provide loans during tough times
• Regulatory oversight

Question 2

What are some central bank policy aims?

Answer 2

• High level of employment
• Stable prices
• Moderate long term interest rates
• Exchange rate stability

Question 3

As a monopolist, the central bank can, in theory:

Answer 3

• Fix the quantity of reserves and let the market push the rate of interest
• Fix the rate of interest and supply any quantity of reserves

Question 4

What does the USA fed consist of?

Answer 4

• The board of governors
• Federal reserve system
• federal open market committee

Question 5

What does the Bank of England act mean?

Answer 5

• BoE responsible for formulating UK monetary policy via the interest rate
• Decisions are made with the primary aim of price stability
• Secondary aim is to support the government’s economic policies and help meet its targets for growth and eomplyment

Question 6

What’s the primary objective of the ECB?

Answer 6

Maintain price stability