Question

Question 1. (Weight 2%, World limit: 450 words) Select two out of the following central banks: Bank of England, Reserve Bank of New Zealand, Bank of Canada, and the Swedish Riksbank. Each of these central banks has adopted explicit 'in ation targeting'. For each of your chosen banks, answer the following questions:

(a) What is their target level of in ation and how do they justify choosing that level?

(b) What actions did it take following the collapse of Lehman Brothers in September 2008 and how did it explain these actions?

(c) Did they hit the zero lower bound on nominal interest rates during the global nancial crisis? If so, how could they adjust their in ation target to reduce the likelihood of this happening again in the future? Present some evidence of a public debate about this issue.

Answer 1

B

Since deposit is decreased by transferring to another bank, then asset will also decrease by the same size to create a balance in the balance-sheet.

30.

A

If deposit increases in a particular bank, then that deposit will be used to lend other firms or households after maintaining the sufficient reserve requirements.

Q. 27 and 28 has improper tabular data so these questions cannot be solved. For example in Q 27, if deposit is 2000 and reserve ratio is 10%, then required reserve = 2000*10% = 200

But, bank holds only 60+100 = 160 as total reserves. S0, no excess reserve is created, but alternatives in Q. 27 are not giving this option.

So, repost the question 27 and 2