Functions of the central bank, Microeconomics

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.

Posted Date: 1/3/2013 1:40:32 AM | Location : United States







Related Discussions:- Functions of the central bank, Assignment Help, Ask Question on Functions of the central bank, Get Answer, Expert's Help, Functions of the central bank Discussions

Write discussion on Functions of the central bank
Your posts are moderated
Related Questions
Survey Methods: The most direct method of forecasting demand in the short run is survey method. Surveys are conducted to collect information about future purchase plans of the

Under capitalism, most production is undertaken by private companies (of various forms), with the goal of generating a profit to the company's owners. Profit is obtained when compa


Normal 0 false false false EN-IN X-NONE X-NONE MicrosoftInternetExplorer4

#how do you draw a demand curve on excel

Q. Describe about Capitalism? Capitalism: An economic system in that privately-owned businesses and companies undertake most economic activity (with the goal of generating priv


when does price and output determined in the unregulated monopoly


The largest public utility company in New South Wales (NSW) is the sole provider of electricity across all regions in the state. The monthly demand for electricity in NSW is given