7 - Banking Homework: Unit 7 :Conceptual Problems In 1900,...

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Banking Homework: Unit 7 Conceptual Problems : In 1900, there were 18 central banks in the world; 100 years later, there were 174. Why does nearly every country in the world now have a central bank ? A central bank plays a vital role in any nation’s economy. By controlling the rate at which it creates paper money, the central bank is able to affect inflation and economic growth . The power of a central bank is based on its monopoly over the issuance of currency. Economics teaches us that monopolies are bad and competition is good. Would competition among more several central banks be better? Provide arguments both for and against . Competition could force central banks to become more efficient and would increase accountability. However, the central bank’s monopoly over the issuance of currency is what allows it to control money growth and inflation . Provide arguments for and against the proposition that a central bank should be allowed to set its own objectives . One could argue that a central bank should be able to set its own objectives so as to
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This note was uploaded on 02/12/2012 for the course ECON 101 taught by Professor Abrams during the Spring '11 term at Adams State University.

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7 - Banking Homework: Unit 7 :Conceptual Problems In 1900,...

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