Which of the Following Techniques Adopted by the Central Banks

question 32

Multiple Choice

Which of the following techniques adopted by the central banks around the world have helped them to achieve credibility?

• A)Maintaining a low rate of inflation through tight monetary policies
• B)Publicly announcing a target rate of inflation
• C)Refusing to bail out the commercial banks at times of failure
• D)Supporting all government budget deficits through deficit financing
• E)Reducing unemployment amidst high inflation

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Definitions:

Pegged Exchange Rate

A fixed exchange rate system in which a currency's value is fixed against the value of another currency or a basket of other currencies.

Chinese Yuan

The official currency of the People's Republic of China, used as a medium of exchange in mainland China.

Inflation

The rate at which the general level of prices for goods and services rises, eroding purchasing power.

Fixed Exchange-Rate System

A monetary system in which the value of a nation's currency is fixed to the value of a single currency, a group of currencies, or a tangible asset such as gold.