What are the main functions of a central bank

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Reference no: EM133190968

Political Science

Questions :

1. Describe and explain why and how debt service ratios rendered Latin American countries vulnerable to international economic shocks and debt crises in the 1980s.

2. How can opening up to capital flows from abroad lead to a financial crisis? Discuss how excessive borrowing and lending by Asian banks, driven by "moral hazard," contributed to the Asian Financial Crisis of 1997.

3. Explain how conditions of low-interest rates and favorable credit conditions created the asset bubble in US residential real estate which was at the heart of the great financial crisis of 2007-2009. How did a decline in housing prices help trigger the subprime crisis?

4. What are the main functions of a central bank? What tools does the Federal Reserve System use to manage the money supply and interest rates? How are these tools used in practice?

5. Why do countries make their central banks independent from the direct control of politicians? Are independent central banks compatible with democratic principles?

Reference no: EM133190968

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