Question

1. Why the stability of the interest rate is considered one the main objectives of a modern central bank?
2. How many directors each Federal Reserve Bank has and who appoints them?
3. Which component of the Federal Reserve System decides on the open market operations and what will be the effect of buying government securities?
4. What is the primary justification for having an independent central bank?

Answer 1

1. Stability of the interest rate is considered one of the main objective of the modern Central Bank because it will be reflecting that there is an stability in the monetary flow into the entire economy because when their interest rates will be stable, it will mean that the economy will be stable and there would be a proper demand and proper supply in the economy.

Interest rate is one of the tool of the central banks in order to control the inflation and deflation and other economic periods and they will be trying to control the monetary flow into the system through increasing or decreasing of interest rates, so it can be said that interest rates will be helpful in order to help the central banks in stabilizing the overall economy and they will want an stable interest rates as it will be reflective of a stable economy.