Question

1. What is the primary objective of a central bank? Do you think that the U.S. central bank (the Federal Reserve aka the Fed) has adequately met this objective or do you think that they have overreached their bounds? Why do you believe this?
2. What actions did major central banks around the world take in response to the financial crisis? Was this appropriate response in your opinion? Why or why not?

Answer 1

Primary objective of a central bank is to maintain a uniform monetary policy in the economy which will be helpful for various section of the society and which can maintain the continuous money flow.

United States Central Bank has most of the time met with this objective and they have tried to infuse an additional level of liquidity also through providing this market with appropriate bailouts and other stimulus packages regularly and designing the policy in accordance with the market needs.

I believe this because Federal Reserve has been continuously proactively cutting interest rates at the time of the recession and providing bailout packages at the time of the recession.

At the time of the financial crisis, monetary policy will be focused at cutting on to the interest rates and providing lower Reserve requirement and bailout packages to various companies I think this is not completely accurate but this is accurate to an an extent that they are trying to stabilize the performance and this is not of accurate because losses should not be socialized whether profits should not be privatised.