Central banks play a crucial role in maintaining economic stability from "summary" of Economics of Money, Banking and Financial Markets, Business School by Frederic S. Mishkin
Central banks are the key institutions responsible for overseeing the monetary system of a country. They are tasked with controlling the money supply and interest rates, which are crucial factors in determining the overall health of an economy. By managing these variables, central banks can influence the level of economic activity, inflation, and employment in a country. One of the primary roles of central banks is to ensure price stability. Inflation, which refers to the general increase in prices of goods and services over time, can have harmful effects on an economy if left unchecked. Central banks use monetary policy tools, such as adjusting interest rates or open market operations, to control inflation and keep it at a stable and low level. In additi...
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