The Operational Components Required for Truly Independent Central Banks Include

question 41

Multiple Choice

The operational components required for truly independent central banks include:

• A) a budget controlled by Congress.
• B) the ability to have policies reversed.
• C) monetary policies that cannot be reversed by anyone outside of the central bank.
• D) the chairperson of the bank being answerable only to the President.

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Definitions:

Forward Exchange Rate

The forward exchange rate is the agreed-upon exchange rate for a currency pair to be traded on a future date, used to hedge against currency risk.

Foreign Exchange Market

A financial market in which the currencies of different countries are traded.

Direct Quote

A representation of the exchange rate between two currencies, stating how much of the home currency is required to buy one unit of the foreign currency.

Forward Exchange Rate

The price agreed upon for a currency transaction that will occur at a future date, used to hedge against currency risk.