Money and Banking Quiz.docx - Question What are the basic objectives of the central bank how does the central bank control the monetary policy of the

Money and Banking Quiz.docx - Question What are the basic...

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Question What are the basic objectives of the central bank, how does the central bank control the monetary policy of the country? Answer The objectives of central banks have changed significantly over the past years as negative economic events have occurred but these are the basic objectives of the central bank. 1. Price stability Price stability is probably one of the leading objectives of central banks. After the high inflation rate in the 1970s and 1980s, and the Great Depression of 1929, price controls are central to central bank policy. 2. Full employment Returning to history, full employment has been one of the central goals of the central bank. However, as the social environment has grown and the understanding of monetary policy has increased, it has taken a step backwards. 3. Financial Stability The central bank often serves as the final lenders to maintain financial stability. For example, many commercial banks require short-term loans to cover their assets and liabilities.
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