Monetary Policy and Central Banks Functions
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Questions and Answers

The central bank's function includes maintaining a safe and efficient payment system?

True

Central banks have the privilege of creating what is called Monetary Base?

True

Banks can turn to the central bank for the money they need to clear payments, at a fixed price, also known as Lender of last Resort?

True

The central bank intervenes in the market by providing its own base money to banks?

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

The Monetary Base is created by the official banks and consists of reserves + currency?

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

Credit institutions extend credits to households and companies without necessarily balancing their operations, resulting in some banks experiencing shortages?

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

In repos, the central bank lends money to commercial banks and receives financial assets as a collateral.

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

The central bank can influence the banks' lending behavior by setting a reserve requirement on the deposits received from the public.

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

The price of liquidity is determined by the refinancing rate, with higher rates leading to lower demand for liquidity.

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

The central bank influences the demand for its liquidity service by setting a price for it.

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

The resulting money-market rate influences all short-term interest rates in the economy.

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

The two overnight standing facilities provided by the central bank are a marginal lending facility and a marginal deposit facility.

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

Banks can obtain short-term liquidity weekly through the central bank's main refinancing operations.

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

Banks having excess liquidity can deposit it at the central bank at the marginal deposit facility rate.

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

The central bank's role in times of stress involves monitoring banks' extension of credit to each other.

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

Potential lenders may be uncertain of the ability of borrowers to repay their debts during stress times, leading to banks' unwillingness to lend to each other.

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

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