What is the basic function of central banks, Macroeconomics

Assignment Help:

Q. What is the basic function of Central banks?

A central bank is a public authority which is responsible for monetary policy for a country or a group of countries. Two significant central banks are the European Central Bank (for countries which are members in the European Monetary Union) and Federal Reserve of the United States. 

Central banks have a monopoly on issuing national currency and primary responsibility of a central bank is to preserve a stable national currency for a country (or a stable common currency for a currency union). Stability is a number of times specified in terms of inflation and/or growth rate in the money supply. 

Other significant responsibilities include providing banking services to commercial banks and government and regulating financial markets and institutions. In this sense, a central bank is the "bankers' bank" - other banks can borrow from or lend money to the central bank. Consequently all banks in a country have an account in the central bank. When a commercial bank orders currency from central bank, corresponding amount is withdrawn from this account. This account is also used for transfers between commercial banks. Central banks also manage country's foreign exchange and gold reserves.


Related Discussions:- What is the basic function of central banks

Find out fixed cost and average cost, Sara runs a small business assembling...

Sara runs a small business assembling personal computers. This table shows her total cost at different levels of output. Number of computers produced

Medical goods or services, For which of the following medical goods or serv...

For which of the following medical goods or services is the income elasticity of demand largest? a. emergency services after a car accident b. measles shots c. physical ex

Determine the example of currency inside banks is not money, Determine the ...

Determine the example of Currency inside banks is not money An example may also illustrate this important fact: Eric has 100 euro - this amount is obviously part of the

Demand analysis, how the demand of pizzas in pizza hut affecting the market...

how the demand of pizzas in pizza hut affecting the market of fast food

How growth are improved living standards, How growth are improved living st...

How growth are improved living standards The two main benefits of growth are improved living standards and technological advancement. As an economy grows, the output of

Compute total demand and firms profit, Suppose three identical firms are e...

Suppose three identical firms are engaged in Cournot competition in quantities. They all have marginal costs equal to 40. Market demand is given by: P(X) = 200 - X = 200 - (x

Find out the total economic surplus, The manager of the world famous Koala ...

The manager of the world famous Koala Caves offers a tour each afternoon starting at 3pm. The caves can be shown to only four people per day without undermining their ecology. Occa

Physiocrats spoke of the natural order, Consider the following: "The physio...

Consider the following: "The physiocrats spoke of the natural order and favored laissez-faire yet strongly supported the absolute authority of the monarchy." Analyze this supposed

Balance between automation and labor, Businesses often decide between using...

Businesses often decide between using automation and labor in production. An automotive environment may have high fixed costs and low variable costs, and an industry that utilizes

Effect of real wage in classical labour market, illustrate the effects of a...

illustrate the effects of a reeal wage existing in the labour market if it is perfectly competitive

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