Topic 9 - Central Banking

What is the main function of a central bank?

• Issue government bonds

• Control the money supply

• Collect taxes

• Provide loans to private companies

Who created the Bank of England to finance wars?

• Napoleon Bonaparte

• King William III

• George Washington

• Queen Victoria

The U.S. Federal Reserve began its operation in:

• 1900

• 1914

• 1920

• 1935

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

• Issue money

• Manage government’s finances

• Control securities markets

• Provide loans during financial stress

What is seignorage?

• Profit from government bonds

• Profit from printing money

• Profit from lending money

• Profit from tax collection

Why do countries create their own central banks?

• To manage foreign reserves

• To control inflation

• To regulate stock markets

• To provide insurance

What is the main objective of monetary policy?

• Increase government revenue

• Control fiscal policy

• Stabilize economic growth

• Lower taxation

What does the money multiplier represent?

• The total amount of reserves

• The increase in money supply for each dollar of reserves

• The base interest rate set by central banks

• The number of loans banks can issue

Which of the following is NOT a part of the monetary base?

• Currency in circulation

• Government bonds

• Reserves in the banking system

• Vault cash

What happens during an open market operation?

• Central banks raise interest rates

• Central banks buy or sell securities

• Central banks provide discount loans

• Central banks issue new currency