UNIVERSITY OF SANTO TOMAS – COLLEGE OF NURSING

Espana Boulevard, Sampaloc, Manila, Philippines 1015

Tel. No. 406-1611 loc.8241 | Telefax: 731-5738 | Website: www.ust.edu.ph

Name: SALAZAR, Nica Sharmaine C. RLE: 8.4

Yr.&Sec.: 4NUR8 Professor: Ma’am Manlangit

1.) Functions of the Central Bank

 A Central Bank is an integral part of the financial and economic system. They are
usually owned by the government and given certain functions to fulfil. These include:
 Issue money. The Central Bank will have responsibility for issuing notes and coins
and ensure people have faith in notes which are printed, e.g. protect against forgery.
Printing money is also an important responsibility because printing too much can
cause inflation.
 Lender of Last Resort to Commercial banks. If banks get into liquidity shortages
then the Central Bank is able to lend the commercial bank sufficient funds to avoid
the bank running short. This is a very important function as it helps maintain
confidence in the banking system. If a bank ran out of money, people would lose
confidence and want to withdraw their money from the bank. Having a lender of
last resort means that we don’t expect a liquidity crisis with our banks, therefore
people have high confidence in keeping our savings in banks.
 Lender of Last Resort to Government. Government borrowing is financed by selling
bonds on the open market. There may be some months where the government fails
to sell enough bonds and so has a shortfall. This would cause panic amongst bond
investors and they would be more likely to sell their government bonds and demand
higher interest rates. However, if the Bank of England intervene and buy some
government bonds then they can avoid these ‘liquidity shortages’. This gives bond
investors more confidence and helps the government to borrow at lower interest
rates.
 Target low inflation. Many governments give the Central Bank a target for inflation.
Low inflation helps to create greater economic stability and preserves the value of
money and savings.
 Target growth and unemployment. As well as low inflation a Central Bank will
consider other macroeconomic objectives such as economic growth and
unemployment.
  Operate monetary policy/interest rates. The Central Bank set interest rates to target
low inflation and maintain economic growth. Every month the MPC will meet and
evaluate whether inflationary pressures in the economy justify a rate increase. To
make a judgement on inflationary pressures they will examine every aspect of the
economic situation and look at a variety of economic statistics to get a picture of
the whole economy.
 Unconventional monetary policy. The Central Bank may also need to use other
monetary instruments to achieve macroeconomic targets.
 Ensure stability of financial system. For example, regulate bank lending and
financial derivatives.
2.) Who is the governor of Central Bank?
 On March 4, 2019, President Rodrigo Duterte appointed Secretary of Budget and
Management Benjamin Diokno as the fifth Governor of the Bangko Sentral ng
Pilipinas
3.) What is Monetary Policy?
 Monetary policy involves influencing and controlling the money supply/interest rates
to target inflation and economic growth. Monetary policy primarily involves changing
interest rates, though it can include other tools such as quantitative easing and open
market operations.
4.) Tools used in Monetary Policy
 Discount rate..
 Open market operations.
 Reserve requirements.
5.) Mechanics applied on the four tools to control the flow of money, interest rate and reserve
requirements
 A Central Bank typically sets the discount rate – the rate at which commercial banks
borrow from the Central bank. If this discount rate is increased, commercial banks will
usually pass this rate increase on to their consumers. In the UK, the Bank of England
set the repo rate. In the US, it is called the discount rate; When a Central Bank buys or
sells government bonds to manipulate short-term interest rates and the money supply.
If the Central Bank creates money and buys government bonds on the open market, this
will increase the money supply and reduce interest rates. If the Central Bank sells
government bonds, then it takes liquidity from the market and reduces money supply –
thereby increasing interest rates. The % of funds a bank must hold against liabilities. If
the reserve ratio rose from 1% to 2%, the bank would have to keep more cash and
reduce lending.
6.) What is a Financial Institution?
 A financial institution (FI) is a company engaged in the business of dealing with
financial and monetary transactions such as deposits, loans, investments, and currency
exchange. Financial institutions encompass a broad range of business operations within
the financial services sector including banks, trust companies, insurance companies,
brokerage firms, and investment dealers. Virtually everyone living in a developed
economy has an ongoing or at least periodic need for the services of financial
institutions.
7.) Different kinds of banks
Commercial Banks:
 These banks play the most important role in modern economic organisation. Their
business mainly consists of receiving deposits, giving loans and financing the trade of
a country. They provide short-term credit, i.e., lend money for short periods. This is
their special feature.
Exchange Banks:
 Exchange banks finance mostly the foreign trade of a country. Their main function is
to discount, accept and collect foreign bills of exchange. They also buy and sell foreign
currencies and help businessmen to convert their money into any foreign money they
need. Their share in the internal trade of a country is usually small. In addition, they
carry on ordinary banking business too.
Industrial Banks:
 There are a few industrial banks in India. But in some other countries, notably Germany
and Japan, these banks perform the function of advancing loans to industrial
undertakings. Industries require capital for a long period for buying machinery and
equipment. Industrial banks provide this type of Mock capital. Industrial banks have a
large capital of their own. They also receive deposits for longer periods. They are thus
in a position to advance long-term loans.
Agricultural or Co-operative Banks:
  The main business of agricultural banks is to provide funds to farmers. They are worked
on the co-operative principle. Long-term capital is provided by land mortgage banks,
nowadays called land-development banks, while short-term loans are given by co-
operative societies and co-operative banks. Long-term loans are needed by the farmers
for purchasing land or for permanent improvements on land, while short-period loans
help them in purchasing implements, fertilizers and seeds. Such banks and societies are
doing useful work in India.
Savings Banks:
 These banks (perform the useful service of collecting small savings. Commercial banks
too run “savings departments” to mobilize the savings of men of small means. The idea
is to encourage thrift and discourage hoarding. Post Office Saving Banks in India are
doing this useful work.
Central Banks:
 Over and above the various types of banks mentioned above, there exists in almost all
countries today a Central Bank. It is usually controlled and quite often owned by the
government of the country.
8.) What is Fiscal Policy?
 The use of taxes, government spending, and government transfers to stabilize an
economy; the word “fiscal” refers to tax revenue and government spending
9.) What is Taxation?
 Taxation is a term for when a taxing authority, usually a government, levies or imposes
a tax. The term "taxation" applies to all types of involuntary levies, from income to
capital gains to estate taxes. Though taxation can be a noun or verb, it is usually referred
to as an act; the resulting revenue is usually called "taxes."
10.) Kinds of taxes
 Taxation applies to all different types of levies. These can include (but are not limited
to):
 Income tax: Governments impose income taxes on financial income generated by
all entities within their jurisdiction, including individuals and businesses.
 Corporate tax: This type of tax is imposed on the profit of a business.
 Capital gains: A tax on capital gains is imposed on any capital gains or profits made
by people or businesses from the sale of certain assets including stocks, bonds, or
real estate.
 Property tax: A property tax is asses by a local government and paid for by the
owner of a property. This tax is calculated based on the property and land values.
 Inheritance: A type of tax levied on individuals who inherit the estate of a deceased
person.
 Sales tax: A consumption tax imposed by a government on the sale of goods and
services. This can take the form of a value-added tax (VAT), a goods and services
tax (GST), a state or provincial sales tax or an excise tax.
11.) What is Agrarian Reform?
  Agrarian Reform could be defined as the rectification of the whole system of
agriculture. It is normally done by the government where they redistribute the
agricultural land among the farmers of the country.
The agrarian reform is concerned with the relation between production and distribution
of land among the farmers. It also concerns the processing of the raw materials that are
produced by farming the land from the respective industries. Agrarian Reform is very
significant for the economy of any country because more than half of the population is
employed in the agricultural sector. Agriculture is the main source of livelihood
especially for the developing countries. Reforms are important because they protect the
rights of the farmers .
12.) What is PD no. 27?
 Decreeing the emancipation of tenants from the bondage of the soil, transferring to
them the ownership of the land they till and providing the instruments and mechanism.
The government shall guaranty such amortizations with shares of stock in government-
owned and government-controlled corporations;
No title to the land owned by the tenant-farmers under this Decree shall be issued to a
tenant-farmer unless and until the tenant-farmer has become a full-fledged member of
a duly recognized farmer's cooperative;
Title to land acquired pursuant to this Decree or the Land Reform Program of the
Government shall not be transferable except by hereditary succession or to the
Government in accordance with the provisions of this Decree, the Code of Agrarian
Reforms and other existing laws and regulations; The Department of Agrarian Reform
through its Secretary is hereby empowered to promulgate rules and regulations for the
implementation of this Decree. This shall apply to tenant farmers of private agricultural
lands primarily devoted to rice and corn under a system of sharecrop or lease-tenancy,
whether classified as landed estate or not; The tenant farmer, whether in land classified
as landed estate or not, shall be deemed owner of a portion constituting a family-size
farm of five (5) hectares if not irrigated and three (3) hectares if irrigated.
13.) What is Bank Run? Explain.
 A bank run occurs when a large number of customers of a bank or other financial
institution withdraw their deposits simultaneously over concerns of the bank's
solvency.
As more people withdraw their funds, the probability of default increases, prompting
more people to withdraw their deposits. In extreme cases, the bank's reserves may not
be sufficient to cover the withdrawals. Bank runs happen when a large number of
people start making withdrawals from banks because they fear the institutions will run
out of money. A bank run is typically the result of panic rather than true insolvency.

A bank run triggered by fear that pushes a bank into actual insolvency represents a
classic example of a self-fulfilling prophecy. The bank does risk default, as individuals
keeping withdrawing funds. So what begins as panic can eventually turn into a true
default situation. That's because most banks don't keep that much cash on hand in their
branches. In fact, most institutions have a set limit to how much they can store in their
 vaults each day. These limits are set based on need and for security reasons. The Federal
Reserve Bank also sets in-house cash limits for institutions. The money they do have
on the books is used to loan out to others or is invested in different investment vehicles.
Because banks typically keep only a small percentage of deposits as cash on hand, they
must increase their cash position to meet the withdrawal demands of their customers.
One method a bank uses to increase cash on hand is to sell off its assets—sometimes at
significantly lower prices than if it did not have to sell quickly. Losses on the sale of
assets at lower prices can cause a bank to become insolvent. A bank panic occurs when
multiple banks endure runs at the same time.

REFERENCES:
Agrarian Reform Definition. (n.d.). Retrieved April 13, 2019, from
http://www.economywatch.com/agrarian/reform.htmlHayes, A. (2019, March 19). Financial
Institution - FI Definition. Retrieved from
https://www.investopedia.com/terms/f/financialinstitution.asp
Kagan, J. (2019, March 23). Taxation. Retrieved April 13, 2019, from
https://www.investopedia.com/terms/t/taxation.asp
Kagan, J. (2019, April 08). What Happens in a Bank Run. Retrieved from
https://www.investopedia.com/terms/b/bankrun.asp
Lesson summary: Fiscal policy. (n.d.). Retrieved April 13, 2019, from
https://www.khanacademy.org/economics-finance-domain/ap-macroeconomics/national-income-
and-price-determinations/fiscal-policy-ap/a/lesson-summary-fiscal-policy
Pettinger, T. (n.d.). Economics. Retrieved April 13, 2019, from
https://www.economicshelp.org/blog/category/economics/
https://www.lawphil.net/statutes/presdecs/pd1972/pd_27_1972.html