Question

Briefly explain what a central bank is and what its most important task is. Discuss the U.S. central bank, including a brief explanation of what is involved in its decision making about the money supply and its ability to affect some goals of macroeconomic policy; including examples of some macroeconomic policy goals that would be affected. Conclude by explaining what is involved in its policies relating to the money and banking system.

Answer 1

Central bank is an independent national authority that conducts monetary policy,provide financial services and regulate banks. Central banks main goals were to stabilize national currency, lower the unemployment and prevent inflation.it studies differeny aspects of econimc problems, compiles data and informations and pubkish reports and periodicals.the main functions of central banks are issue of currency, bankers to government , controller of credit and money supply,exchange control and custodian of foreign exchange or balances.

Federal bank is the central banking system in US.central bank control money supply by buying and sellling goverment debt in the form of short term government bonds.in terms of ecnomics it is termed as open market operations usually central bank own a big portion of their country debt actually monetary policy is a central banks action and communications that manges the money supply.monetary policy increments the liquidity ito increase the economic growth. It reduce inflation.the fed use 4 tools to get its monetary policy goals that are reserve requirments, discount rate, open market operations, intrest on reserves.the monetary policy enacted by central banks by manipulating the money supply in an economy