For each question, identify the statement as True, False, or Uncertain, and explain your reasoning (in total of not more than one hundred words). The maximum marks for each question will be given for a full and correct explanation. You may use written, diagrammatic, and mathematical arguments as appropriate.

1. Financial deregulation that increases the degree of competition among banks should be accompanied by a rise of the central bank's policy rate.
2. A policy of quantitative easing (QE) might be especially useful when the short-term nominal interest rate reaches some effective lower bound because it is likely to encourage commercial banks to lend more to the private economy.

Thank you!