4.2.4.3 Central banks and Monetary policy

Which is NOT a main challenge facing the Bank of England?

• Supporting an unsustainable economic
• Keeping inflation expectations low, i.e. 2% (+/- 1%)
• Re-balancing the economy towards (X) and (I)
• Building a more secure banking and credit system

Which is NOT a committee at the Bank of England?

• Budget Committee (BC)
• Monetary Policy Committee (MPC)
• Financial Policy Committee (FPC)

What does the MPC NOT consider when setting interest rates?

• Discretionary fiscal policy
• Share prices and house prices
• Growth of wages
• GDP growth

Financial Policy Committee (FPC): Which is untrue?

• FPC hasn't power to alter loan-to-value ratios
• FPC is charged with safeguarding financial stability
• The FPC can change the cash reserve requirements for Banks
• FPC has the power to alter loan-to-value ratios

QE aims to...

• Stimulate lending
• Pay national debts

QE is when the BofE England purchases from pension funds and banks...

• Existing government and corporate bonds
• New government and corporate bonds
• Existing government bonds and new corporate bonds

QE should lead to a rise in asset prices?

• Yes
• No

If the vale of the bond increases,...

• the yield falls
• the yield remains unchanged
• the yield increases

If bond yields fall, investors switch to shares. This creates a positive wealth effect.

• True
• False

Lower yields DO NOT push down borrowing costs for business.

• False
• True