How to Maintain Price Stability During Financial Crises Flashcards
What is the role of the central bank during a financial crisis?
To maintain economic stability by lowering interest rates and injecting money into the economy.
How does lowering interest rates help during a crisis?
It encourages borrowing and investment, boosting economic activity.
What could happen if the central bank injects too much money into the economy?
It could lead to uncontrolled inflation.
What is the risk of injecting too little money?
It risks leading to a recession.
What is inflation?
The general increase in prices and fall in the purchasing value of money.
What is a recession?
A period of economic decline marked by falling GDP and rising unemployment.
How does the central bank help prevent massive layoffs during a crisis?
By injecting money into the economy to keep companies afloat.
What is a financial crisis?
A situation in which financial institutions or assets suddenly lose a large part of their value.
Why is it important to understand the role of the central bank?
It helps individuals understand how economic decisions impact their daily lives.
What is the main goal of the central bank during an economic crisis?
To maintain stability and avoid both inflation and recession.
What is meant by a ‘delicate balance’ in central bank policies?
The need to balance between preventing inflation and avoiding recession.
What upcoming event is mentioned in the transcript?
The National Monetary Policy Meetings on October 9th.
Who will be speaking at the National Monetary Policy Meetings?
The Governor of the Bank of France.
What is one of the main tools used by the central bank in a crisis?
Interest rate adjustments.
How can central bank decisions affect everyday people?
By influencing employment rates, inflation, and investment opportunities.
