Role of Governments

Question 1

What is the government’s role in regulation and oversight of financial markets?

Answer 1

To ensure fairness, transparency, and protect against fraud and manipulation.

Question 2

How do central banks influence financial markets?

Answer 2

Through monetary policy—controlling interest rates, money supply, and inflation.

Question 3

What is market stabilization by the government?

Answer 3

Intervening during crises via bailouts, lending, or temporary market controls.

Question 4

Why do governments issue bonds?

Answer 4

To borrow money and set a benchmark interest rate for other financial instruments.

Question 5

How do governments promote market development?

Answer 5

By building legal and technical infrastructure, and encouraging financial education.

Question 6

What is the role of tax policy in financial markets?

Answer 6

It shapes investor behavior through taxes and incentives like retirement savings plans.

Question 6

What are capital controls and FX interventions?

Answer 6

Government measures to control currency exchange rates and cross-border capital flows.

Question 7

How do governments protect investors?

Answer 7

By enforcing laws, prosecuting fraud, and ensuring fair access to markets.