Role of central banks

Question 1

What is the main goal of central banks through monetary policy?

Answer 1

To achieve stable prices, full employment, and sustainable economic growth.

Question 2

What are the key tools of monetary policy?

Answer 2

Open market operations, interest rate setting, and reserve requirements.

Question 3

How do central banks control inflation?

Answer 3

By raising or lowering interest rates to influence spending and price levels.

Question 4

How do central banks manage exchange rates?

Answer 4

By intervening in forex markets or using a fixed/managed exchange rate system.

Question 5

What is meant by “lender of last resort”?

Answer 5

Providing emergency liquidity to banks during financial crises.

Question 6

What role do central banks play in financial regulation?

Answer 6

Supervising banks and enforcing safe banking practices.

Question 7

What is quantitative easing (QE)?

Answer 7

A central bank buying government securities to inject liquidity into the economy.

Question 8

How do central bank actions affect asset prices?

Answer 8

By influencing interest rates, which affect the valuation of stocks, bonds, and other assets.

Question 9

What is global monetary coordination?

Answer 9

Central banks working together during global crises to stabilize the financial system.