A country is experiencing high inflation. Which central bank action is most likely to help stabilize the economy?, Lowering interest rates to encourage borrowing, Raising interest rates to reduce spending, Printing additional currency to fund government projects, Buying foreign currencies to reduce reserves, Which of the following best describes the role of a central bank in supervising commercial banks?, Ensuring banks provide loans to all consumers, Monitoring reserves, risk management, and preventing systemic instability, Setting commercial bank interest rates independently of monetary policy, Directly investing in private sector projects, If depositors suspect that a bank may fail, what immediate action by the central bank can prevent systemic collapse?, Acting as lender of last resort to provide liquidity, Increasing the reserve-asset ratio for the bank, Lowering the national currency’s exchange rate, Issuing new banknotes for general circulation, Central banks manage both gold and foreign currency reserves to influence exchange rates and maintain currency stability., True, False, A commercial bank is holding $1 billion in deposits. The reserve-asset ratio is 10%. How much must the bank hold in reserves?, $10 million, $1 billion, $100 million, $900 million, If a central bank sells its own currency in the foreign exchange market, which of the following is the likely effect?, The domestic currency will depreciate, The domestic currency will appreciate, Inflation will immediately fall, Commercial banks must increase their reserve ratios, Which of the following statements about bank runs is most accurate?, They only occur when banks make poor lending decisions, They occur when depositors withdraw funds simultaneously due to fear of insolvency, Central banks guarantee all deposits to prevent runs, Bank runs have no impact on systemic stability, Why might a central bank not always rescue a failing bank, even if it is the lender of last resort?, To reduce the supply of money in the economy, To increase the reserve-asset ratio for other banks, To force the bank to raise interest rates, To prevent banks from taking excessive risks in the future (moral hazard), Monetary policy focuses only on controlling domestic interest rates and does not consider inflation or currency stability., True, False, A country shares a common currency with other nations. Which institution would perform central bank functions for all the member countries?, European Central Bank (ECB), International Monetary Fund (IMF), World Bank, Federal Reserve

Central banking

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