UPLEARN central banks

Question 1

whos finances does the Bank of England manage?

Answer 1

the government and other highstreet banks

Question 2

whats the Bank of Englands role?

Answer 2

The Bank of England plays a role in lending to high-street banks and lending to the government. It also plays a role in implementing monetary policy.

Question 3

what are the two instruments of monetary policy?

Answer 3

controlling

interest rates
money supply

Question 4

if a highstreet bank like natwest borrows from the central bank what does the central bank do?

Answer 4

charge an interest rate

Question 5

what is the interest rate set by the central bank referred to as?

Answer 5

the base interest rate

Question 6

why is a change in the base interest rate important?

Answer 6

a change in the base interest rate will have a large impact on the economy because high-street banks will follow the central banks lead

Question 7

when do we have QE?

Answer 7

When the central bank buys financial assets from high-street banks in order to encourage them to lend as their money supply increases.

increases consumption
increases AD
increases real GDP