Functions of the central bank, Microeconomics

Assignment Help:

Functions of the Central Bank:

Currency issue and distribution: The Central Bank is the only institution empowered by law to issue currency notes and coins that are used as a medium of exchange in the country. The monopoly power of issuing legal tender currency is important to control the supply of money in order to prevent inflation.

The bankers’ banks: The Central Bank provides facilities for other banks, especially commercial banks to keep their cash reserve and clear their balance through clearing house. It also grants loans to or discount the bills of commercial banks when they are short of fund; hence the Central Bank is referred to as ‘lender of last resort’.

Banker to the government:The Central Bank keeps the accounts of the government and of all its corporations and agencies. It receives all payments due to the government, as well as undertake borrowing on behalf of the government through the issuance of short-term securities e.g. treasury bills and treasury certificates, and long-term securities – e.g. development stocks. The Central Bank is also responsible for the management of domestic and external debts of the government.

Promotion of monetary stability: The central bank controls money supply in the economy to promote price stability.This involves the use of instruments of monetary policy such as open market operation (OMO), reserve requirements, discount rate, etc.


Related Discussions:- Functions of the central bank

...., Homework 4 Q1. Suppose a consumer has utility function (u) = xy where...

Homework 4 Q1. Suppose a consumer has utility function (u) = xy where x and y are amounts of two commodities that this consumer consume. Suppose this consumer’s income is $120, pri

Cost functions for the electric power sector, Cost Functions for the Electr...

Cost Functions for the Electric Power Sector Scale Economies in the Electric Power Industry Average Cost of Production in Electric Power Industry * Findings -

Use of resources - international monetary fund, Use of Resources - INTERNAT...

Use of Resources - INTERNATIONAL MONETARY FUND: IMF provides temporary assistance to member-countries to tide over balance of payments deficits. When the country requires fore

Demand and supply, During the 1990s, technological advance reduced the cost...

During the 1990s, technological advance reduced the cost of computer chips. Explain, with the use of supply and demand diagrams, how the following markets are affected in terms of

Volume of trade, Volume of Trade: It relates to the size of internatio...

Volume of Trade: It relates to the size of international transactions. Since a large number of commodities enter in international transactions and their aggregate can be found

Price/earnings (p/e) ratio, Price/Earnings (P/E) Ratio This is a measur...

Price/Earnings (P/E) Ratio This is a measure of an organization investment potential. Literally, a P/E ratio is how much a share is worth per dollar of earnings. The price-earn

What are price ceilings and price floors, 1. Explain what are price ceiling...

1. Explain what are price ceilings and price floors and how they effect the market for a good or service. Also show through graphs, if they cause any inefficiencies in a perfectly

Natural rate of unemployment, Natural Rate of Unemployment: According to ne...

Natural Rate of Unemployment: According to neoclassical economics, wage rate is determined by a process of labour-market clearing (in which employers and workers compete with each

How to measure inflation, Measure Inflation :  There are two common methods...

Measure Inflation :  There are two common methods of measuring inflation:  (i)  percentage change in price index numbers (PIN) , and  (ii)  change in  GNP  deflator. The tw

The basics, the basics in micro economics

the basics in micro economics

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd