Quiz on the Role of Central Banks - Chapter 2

What is the primary function of a central bank as a bank of issue?

• To issue government bonds

• To control and regulate the supply of currency

• To provide loans to commercial banks

• To manage foreign exchange reserves

Which of the following is a goal of central banks?

• Stability of the monetary and financial system

• Increasing government debt

• Maximizing profits for commercial banks

• Promoting foreign investments only

What does inflation targeting involve?

• Setting a fixed exchange rate

• Fixing a certain rate of inflation as the target

• Controlling the money supply without a target

• Increasing interest rates indefinitely

Which system allows the central bank to intervene in the forex market?

• Currency board system

• Fixed exchange rate system

• Managed float system

• Free float system

What is the main objective of monetary policy in India?

• To control foreign investments

• To ensure price stability and economic growth

• To increase government spending

• To regulate stock market prices

What is the role of the central bank as a custodian of foreign exchange reserves?

• To provide loans to foreign governments

• To regulate the flow of foreign exchange

• To issue foreign currency notes

• To manage government debt

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

• Commercial lending

• Government's banker

• Controller of credit

• Bank of issue

What does money supply targeting aim to control?

• The interest rates only

• The total amount of money in circulation

• The exchange rates exclusively

• The foreign investments

Which of the following is a viable alternative to central banking?

• Free banking system

• Managed float

• Fixed exchange rate

• Currency board

What is the primary responsibility of the Monetary Policy Committee in India?

• To regulate commercial banks

• To formulate monetary policy

• To manage foreign exchange reserves

• To issue currency notes