Central Banking Quiz

What is the primary goal of a central bank?

• To maximize profits for commercial banks

• To provide loans to individuals

• To oversee the monetary system and foster economic growth without inflation

• To regulate stock markets

Which of the following is NOT a function of a central bank?

• Issuing government bonds

• Managing the national debt

• Acting as a lender of last resort

• Controlling the money supply

What does monetary policy primarily influence?

• Government spending

• Taxation levels

• The availability and cost of money and credit

• Stock market performance

Which of the following is a tool used in open market operations?

• Setting interest rates

• Controlling inflation directly

• Adjusting reserve requirements

• Buying and selling government securities

What is the lender of last resort (LOLR) function?

• Providing loans to individuals

• Offering financial advice to banks

• Providing reserves to banks in financial trouble

• Regulating interest rates

What is the required reserve ratio?

• The amount of government bonds a bank must hold

• The percentage of deposits banks must keep as reserves

• The total amount of loans a bank can issue

• The interest rate set by the central bank

Which of the following describes central bank independence?

• The obligation to report to commercial banks

• The requirement to follow government directives

• The ability to set its own goals without political influence

• The need to maintain high profits

What is quantitative easing?

• A method to increase interest rates

• A strategy to decrease inflation

• A policy to reduce government spending

• A monetary policy tool to increase money supply by purchasing assets

What is the main objective of fiscal policy?

• To influence government spending and taxation

• To control the money supply

• To regulate interest rates

• To manage foreign exchange reserves

Which of the following is a disadvantage of discretion in monetary policy?

• Flexibility in decision-making

• Potential for time inconsistency

• Ability to respond quickly to economic changes

• Clear guidelines for policy implementation