Question

What are the primary functions of a central bank?
Conduct monetary policy
Grow the economy
Provide banking services to businesses and consumers
Ensure that the financial system is stable
Provide banking services to commercial banks, depository institutions, and the federal government
Conduct fiscal policy

Answer 1

Answer:

The correct answer is:

• Conduct monetary policy;
• Ensure that the financial system is stable;
• Provide banking services to commercial banks, depository institutions, and the federal government.

Explanation:

A central bank is the apex monetary authority in a country. It plays several crucial roles in the smooth working of the economy.

1. A central bank issues currency on behalf of the government.
2. It formulates monetary policy on behalf of the government.
3. It acts as a banker for the government.
4. It acts as a banker for commercial banks.
5. It supervises all financial institutions.

The role of providing services to businesses and consumers is played by commercial banks. Fiscal policy is formulated by the government. The responsibility of ensuring the growth of the economy also falls with the government.