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Questions and Answers
What effect does buying government bonds have on the money supply?
What effect does buying government bonds have on the money supply?
Which of the following is NOT a key activity of the central bank?
Which of the following is NOT a key activity of the central bank?
What role does the central bank play as a lender of last resort?
What role does the central bank play as a lender of last resort?
How does the central bank help maintain exchange rate stability?
How does the central bank help maintain exchange rate stability?
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Which activity involves controlling money supply and interest rates?
Which activity involves controlling money supply and interest rates?
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What is the primary role of the Central Monetary Authority in the Philippines?
What is the primary role of the Central Monetary Authority in the Philippines?
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Which of the following best describes the function of central banks in the economy?
Which of the following best describes the function of central banks in the economy?
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Which component is not part of the structure of central banks?
Which component is not part of the structure of central banks?
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How do central banks help stabilize the economy?
How do central banks help stabilize the economy?
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What role does the governing body of a central bank play?
What role does the governing body of a central bank play?
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What is the purpose of regional offices of some central banks?
What is the purpose of regional offices of some central banks?
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Which of the following statements about the roles of central banks is incorrect?
Which of the following statements about the roles of central banks is incorrect?
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Which of the following is a key function of the central bank in controlling inflation?
Which of the following is a key function of the central bank in controlling inflation?
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What are government bonds considered in a central bank's balance sheet?
What are government bonds considered in a central bank's balance sheet?
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Which of the following is NOT typically included in a central bank's assets?
Which of the following is NOT typically included in a central bank's assets?
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Which factor contributes to international monetary stability?
Which factor contributes to international monetary stability?
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What do central banks do to control the value of their currencies?
What do central banks do to control the value of their currencies?
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What is the primary function of currency in circulation?
What is the primary function of currency in circulation?
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Which aspect is essential for smooth functioning in international trade?
Which aspect is essential for smooth functioning in international trade?
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What reflects the central bank’s equity in relation to its balance sheet?
What reflects the central bank’s equity in relation to its balance sheet?
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What does a central bank reorganization typically involve?
What does a central bank reorganization typically involve?
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What is one of the primary goals of implementing governance changes in a central bank?
What is one of the primary goals of implementing governance changes in a central bank?
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Which of the following is NOT a function of Bangko Sentral ng Pilipinas (BSP)?
Which of the following is NOT a function of Bangko Sentral ng Pilipinas (BSP)?
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How does adjusting reserve requirements impact the economy?
How does adjusting reserve requirements impact the economy?
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What do operational reforms primarily aim to change in a central bank?
What do operational reforms primarily aim to change in a central bank?
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What is a key impact of setting interest rates by the BSP?
What is a key impact of setting interest rates by the BSP?
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Why are legal or regulatory adjustments necessary for a central bank?
Why are legal or regulatory adjustments necessary for a central bank?
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What defines monetary tools used by central banks like the BSP?
What defines monetary tools used by central banks like the BSP?
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What is the primary responsibility of Bangko Sentral ng Pilipinas in managing currency?
What is the primary responsibility of Bangko Sentral ng Pilipinas in managing currency?
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Study Notes
Open Market Operations
- The BSP controls the money supply by buying or selling government bonds.
- Buying bonds injects more money into circulation.
- Selling bonds removes money from circulation.
Lending to Banks
- The BSP acts as a lender of last resort, providing funds to banks in times of need.
- This ensures banks have adequate resources to operate smoothly.
Central Bank Activities
- The central bank manages the country's economy and financial system.
- Key activities include monetary policy, issuing currency, supervising banks, managing foreign reserves, and overseeing payment systems.
Monetary Policy
- The central bank controls the money supply and interest rates to manage inflation and economic stability.
Bangko Sentral ng Pilipinas (BSP)
- The BSP is the Philippines' central bank, managing money, controlling inflation, and ensuring financial system stability.
Monetary Authority
- An organization that controls a country's money supply and interest rates.
- Manages the amount of money in the economy and the cost of borrowing money, contributing to economic stability.
Central Banks of the World
- Central banks are the main banks for a country.
- They manage money, set interest rates, and ensure financial system stability.
- Each country typically has its own central bank.
Key Roles of Central Banks
- Control the money supply.
- Set interest rates.
- Stabilize the economy.
- Regulate banks.
Structure of Central Banks
- A governing body makes top decisions.
- A governor or president leads the central bank.
- Departments handle specific tasks such as monetary policy, bank supervision, and financial stability.
- Regional offices may be present to manage the economy across the country.
- Support staff includes economists, analysts, and other experts.
Central Bank Balance Sheet
- Shows the central bank's assets and liabilities.
- Assets include government bonds, foreign reserves, and loans to banks.
- Liabilities include currency in circulation and bank reserves.
International Monetary Stability
- Refers to the smooth functioning of the global financial system.
- Includes stable currencies, exchange rates, and confidence in international trade and investment.
- It helps avoid extreme currency fluctuations and financial crises.
Key Aspects of International Monetary Stability
- Stable exchange rates.
- Coordinated monetary policies by central banks.
- Global cooperation, often through organizations like the IMF.
Central Bank Reorganization
- Involves changes to the central bank's structure, governance, or functions.
- Aims to improve efficiency, transparency, or alignment with government policies.
Types of Central Bank Reorganization
- Governance changes: Updating leadership structure for stronger oversight.
- Operational reforms: Changes to monetary policy or bank supervision practices.
- Legal and regulatory adjustments: Revising laws to enhance independence or accountability.
- Technology upgrades: Incorporating modern technologies for better management and efficiency.
Functions of the Bangko Sentral ng Pilipinas (BSP)
- Manages the country's money supply.
- Sets interest rates.
- Supervises banks.
- Manages the Philippine currency.
Monetary Tools
- Methods used by the BSP to control the money supply and influence the economy.
Reserve Requirements
- Banks must keep a certain percentage of deposits as reserves, not loaned out.
- The BSP controls how much banks can lend by adjusting the reserve requirement.
Interest Rates
- The BSP sets key interest rates, such as the policy rate.
- Lower rates encourage borrowing and spending, while higher rates discourage borrowing to control inflation.
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Description
This quiz focuses on the essential functions and activities of the Bangko Sentral ng Pilipinas (BSP), the central bank of the Philippines. It covers topics such as open market operations, lending to banks, and the central bank's role in managing monetary policy and economic stability.