Central Bank and Monetary Policy: Understanding the Bank of England's Tools and Role

This video tutorial explores the role of the Bank of England in managing monetary policy, focusing on monetary stability and financial stability. It details the structure and responsibilities of the Monetary Policy Committee, including its role in setting the Bank rate to achieve inflation targets. The video introduces key monetary policy tools such as Bank rate changes, quantitative easing, and the Funding for Lending scheme. It also discusses the regulation of lending and the concept of forward guidance, which influences economic expectations. The tutorial concludes with a preview of more technical details to be covered in future lectures.

What is the primary goal of the Bank of England in managing the money supply?

• To increase the money supply

• To achieve monetary stability

• To decrease interest rates

• To control government spending

Who chairs the Monetary Policy Committee?

• The Chief Economist

• The Governor of the Bank of England

• The Prime Minister

• The Chancellor of the Exchequer

What is the main responsibility of the Monetary Policy Committee?

• Issuing government bonds

• Regulating the stock market

• Setting the Bank rate to achieve the inflation target

• Managing the national budget

What is quantitative easing?

• Increasing interest rates to control inflation

• Printing money to purchase financial assets

• Reducing taxes to stimulate the economy

• Selling government bonds to reduce debt

What was the purpose of the Funding for Lending scheme?

• To provide cheap finance to banks for lending to the real economy

• To stabilize the stock market

• To increase government revenue

• To reduce the national debt

How does the Bank of England use forward guidance?

• By setting fixed interest rates

• By issuing new currency

• By providing clear views on future economic conditions and interest rate changes

• By regulating international trade

What is the purpose of regulating lending in the housing market?

• To reduce government intervention

• To encourage foreign investment

• To control demand dynamics and prevent inflation

• To increase house prices