explain the role of the central bank in economic growth

Expert Solution

Needless to say that the main role of central bank is to issue currency notes which acts as a monopoly. It is also a banker's bank and lender of last resort.

One of the main role of central bank in economic development is to create and lend to financial institutions. These institutions are required to provide the large credit facilities and mostly are located in metro or larger cities in underdeveloped countries.

Also there is a tremendous need to balance demand and supply of money. Excess of money will denote inflation whereas shortage of money will inhibit growth.

The central bank helps to solve the problem of balance of payments (BOP) as these problems lead to difficulty in achieving set targets.

The central Bank also can reduce the Cash Reserve Ratio (CRR) or Statutory Liquidity Ratio (SLR).

Also Central bank plays a vital role in structuring the interest rate. A low interest rate is required to motivate the private investment in agricultural activities. The farmers will not afford to pay higher interest rate. Also low rate of interest encourages public investment.

jeff jeffy answered 1 year ago

Write an essay about the role of the central bank in economic growth ?( 400-500 word...

Write an essay about the role of the central bank in economic growth ?( 400-500 word )

Briefly explain the role of the central bank (Federal Reserve) in the economy.

Explain the role of an increase in physical capital in economic growth

Explain the structure and role of central bank in the financial stability of the country. Also...

Explain the structure and role of central bank in the financial stability of the country. Also give your opinion, whether central bank should be independent or not?

the us central bank has the stated goal of promoting sustainable economic growth, maintaining stable price...

the us central bank has the stated goal of promoting sustainable economic growth, maintaining stable price level and promoting max employment. if the federal reserve believes that us economy is beginning to grow to fast and create too much inflation, what could they do to slow down the economy a bit in order to maintain a stable price level in sustainable economic growth

Explain the role of the market for loanable funds in sustainable economic growth. (long answer question)

You are the economic advisor to the central bank of Norway and the country suffers an...

You are the economic advisor to the central bank of Norway and the country suffers an unexpected increase in unemployment. • Introduce briefly the economic situation of Norway. Find and present relevant data following the guidelines. Find out about recent course of monetary policy actions in the country following the guidelines. Describe and analyse the potential effects of an unexpected increase in unemployment on the different sectors and the aggregate performance of the country’s economy. • Consider some actions of...

The Bank of England (Central Bank) Part 1: Background knowledge: what is the role and objectives...

The Bank of England (Central Bank) Part 1: Background knowledge: what is the role and objectives of the central bank in your country? Provide a brief overview of how your country ́s central bank conducts monetary policy. Using a graph created in a package like Excel, show and discuss how the monetary policy instrument has changed over time starting from 1990. Part 2: What are the current domestic conditions you think are relevant for deciding what to do with the...

(a) State the central conclusion of the Solow model of economic growth. (b) In terms of...

(a) State the central conclusion of the Solow model of economic growth. (b) In terms of the Solow growth model, discuss the convergence hypothesis. (c) List two ways to promote stronger economic growth. (d) Describe the growth slowdown that has been labelled “The Great Stagnation”.

Define economic growth and explain the importance of increases in productivity in sustaining economic growth

Question