Central Banks and Monetary Policy
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Questions and Answers

Which tool is NOT available to central banks for monetary policy?

  • Reserve requirements
  • Discount rate (correct)
  • Open market operations
  • Refinancing rate

    • What are the three key concepts thought to be important for the success of central banks?

  • Central bank accountability, flexibility, and efficiency
  • Central bank autonomy, stability, and secrecy
  • Central bank independence, credibility, and transparency (correct)
  • Central bank regulation, supervision, and profitability

    • Which of the following is NOT a role of central banks in modern economies?

  • Regulator and supervisor of the payments system
  • Monopoly supplier of the currency
  • Banker to the government and the bankers’ bank
  • Lender of first resort (correct)

    • What is the primary role of central banks in relation to the domestic currency?

    <p>Sole supplier</p> Signup and view all the answers

    What were promissory notes issued by in the earliest form of money?

    <p>Private banks</p> Signup and view all the answers

    What was money initially convertible into in its earliest form?

    <p>Gold</p> Signup and view all the answers

    What are the two types of institutions mentioned in the text as being designated as the monopoly suppliers of a currency?

    <p>State-owned institutions and central banks</p> Signup and view all the answers

    What are the two main roles of central banks in relation to the banking system?

    <p>Banker and supervisor</p> Signup and view all the answers

    What are the three primary tools available to central banks for monetary policy?

    <p>Open market operations, refinancing rate, and reserve requirements</p> Signup and view all the answers

    How many roles of central banks are mentioned in the text?

    <p>Seven</p> Signup and view all the answers

    Which principle did most major economies abandon in the first half of the twentieth century?

    <p>The convertibility principle</p> Signup and view all the answers

    Which term refers to money that is not convertible into any other commodity?

    <p>Fiat money</p> Signup and view all the answers

    What role do central banks play in modern economies?

    <p>All of the above</p> Signup and view all the answers

    What is the role of central banks in the payments system?

    <p>Oversee, regulate, and set standards for the country's payments system</p> Signup and view all the answers

    What is the significance of central banks being the sole suppliers of domestic currency?

    <p>They have the capacity to print money</p> Signup and view all the answers

    What is the term for money that must be accepted when offered in exchange for goods and services?

    <p>Legal tender</p> Signup and view all the answers

    What is the role of central banks as lenders of last resort?

    <p>To provide liquidity to banks facing crisis</p> Signup and view all the answers

    Which role is NOT assumed by central banks?

    <p>Regulator and supervisor of the payments system</p> Signup and view all the answers

    What is the primary objective of most central banks?

    <p>Maintaining price stability</p> Signup and view all the answers

    What is the term for money that derives its value through government decree and acceptance for payment of goods and services?

    <p>Fiat money</p> Signup and view all the answers

    What could potentially happen if central banks decide to sell significant proportions of their gold reserves?

    <p>Gold prices could decrease</p> Signup and view all the answers

    What is the role of central banks in managing foreign currency reserves?

    <p>All of the above</p> Signup and view all the answers

    What does monetary policy refer to?

    <p>Influencing the quantity of money and credit in an economy</p> Signup and view all the answers

    What is the term for money that can be redeemed for a prespecified amount of gold?

    <p>Convertible money</p> Signup and view all the answers

    What is the highest profile role that central banks assume?

    <p>Conductor of monetary policy</p> Signup and view all the answers

    What is one of the roles of central banks in relation to the banking system?

    <p>Regulator and supervisor of the payments system</p> Signup and view all the answers

    What is the ideal position of central banks in implementing and determining monetary policy?

    <p>Sole supplier of a country's domestic currency</p> Signup and view all the answers

    What are the objectives of monetary policy related to?

    <p>Stability of the financial system and the payments systems</p> Signup and view all the answers

    What is NOT mentioned as an objective of central banks?

    <p>Promoting understanding of the financial sector</p> Signup and view all the answers

    What is one of the roles of central banks in relation to the government?

    <p>Banker to the government</p> Signup and view all the answers

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