4.2.4.3 Monetary Policy NOTES

What is the primary function of a central bank?

• Issuing passports

• Formulating and implementing monetary policy

• Direct taxation

• Consumer protection

Which entity does the central bank serve as a banker to, besides commercial banks?

• The government

• Local businesses

• Non-profit organizations

• Multinational corporations

What does monetary policy primarily influence?

• Cultural policies

• Money supply and credit conditions

• Educational content

• Healthcare regulations

What is one of the tools used by central banks to control the money supply?

• Direct consumer loans

• Open market operations

• Corporate audits

• Public speeches

What is the main objective of setting reserve requirements?

• To regulate the stock market

• To increase the government's revenue

• To monitor private investments

• To control the amount of money banks can lend

What does the Monetary Policy Committee (MPC) set in the Bank of England?

• Corporate tax rates

• Educational standards

• The national budget

• The bank rate

What is a direct effect of a depreciation in the exchange rate?

• Higher local investment

• Lower tourism rates

• Increased net exports

• Decreased net exports

Which channel is part of the monetary policy transmission mechanism?

• Agricultural Channel

• Legislative Channel

• Television Broadcasting Channel

• Interest Rate Channel

What does forward guidance by a central bank provide?

• Investment funds

• Clarity on future monetary policy

• Business licenses

• Consumer loans

What factor does the MPC consider when setting the bank rate?

• Inflation Outlook

• Sports achievements

• Entertainment industry profits

• Cultural trends