Central Banking and Monetary Policy Quiz

What is one of the primary functions of a central bank?

• Issue securities for companies

• Act as banker to the government and commercial banks

• Manage the assets of wealthy individuals

• Publish monetary and banking statistics

What is meant by 'monetary stability' as defined in the document?

• High inflation rates

• Stable prices and confidence in the currency

• Deflation control

• Eliminating all financial risks

Who sets the inflation target in the UK?

• The Bank of England

• Commercial banks

• The government

• Financial institutions

What action does the Bank of England take to meet the inflation target?

• Influencing the amount of money in circulation

• Issuing securities for companies

• Reducing government debt

• Increasing taxes

Which market does the Bank of England use to borrow short-term funds?

• Foreign exchange market

• Real estate market

• Money markets

• Stock market

Which of the following is NOT a function of a central bank as listed in the document?

• Managing reserves of gold and foreign currencies

• Supervising the banking system

• Managing individual savings accounts

• Maintaining financial stability

What does the term 'sterling' refer to in the document?

• A type of investment

• The British currency

• A bank's interest rate

• A risk assessment measure

What happens when the Bank of England changes the official interest rate?

• It affects the money supply only

• It influences both the money supply and interest rates

• It impacts international trade exclusively

• It has no impact on inflation

How does the Bank of England aim to maintain financial stability?

• By eliminating all risks

• By detecting and reducing threats to stability

• By issuing banknotes

• By lending money to small businesses

Which of the following is a correct definition of 'inflation'?

• A decrease in the price of goods and services

• An agreed plan of what to do

• A general, continuous increase in prices

• The name of the British currency