7 Questions
What action does the central bank take during a recession to encourage an expansion in lending and deposits?
Decrease the required reserve ratio
What is the bank rate or discount rate?
Interest rate charged by the central bank on loans to commercial banks
How does an increase in the bank rate or discount rate affect borrowing costs?
Borrowing costs increase
During inflation, what action does the central bank take with regard to the interest rate?
Increases the interest rate
How does reducing the bank rate during a recession impact credit creation?
Increases credit creation
In what situation would a central bank increase its lending rate?
During inflation
How does an increase in the required reserve ratio impact lending by commercial banks?
Decreases lending
Test your knowledge on the functions of a central bank such as managing a country's foreign exchange reserves, implementing exchange rate systems, and acting as a banker to commercial banks. This quiz covers key concepts related to the central bank and its monetary policies.
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