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What is the main purpose of a central bank?

Practice Questions

Q1
What is the main purpose of a central bank?
  1. To provide loans to the public
  2. To manage the country's monetary policy
  3. To offer retail banking services
  4. To insure deposits

Questions & Step-by-Step Solutions

What is the main purpose of a central bank?
  • Step 1: Understand that a central bank is a special bank for a country.
  • Step 2: Know that the central bank controls the money supply, which means it decides how much money is available in the economy.
  • Step 3: Learn that the central bank sets interest rates, which affects how much it costs to borrow money.
  • Step 4: Realize that the central bank aims to keep prices stable, so things don't get too expensive or too cheap.
  • Step 5: Remember that the central bank works to keep the financial system safe and stable, preventing bank failures and economic crises.
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