Question

Why do central banks play an important role in the global economy

Answer 1

The correct answer is: "Central banks are in charge of the monetary policy".

Central banks, such as the Federal Reserve, are in charge of designing and applying the monetary policy, which consists on influencing the amount of money in circulation in the economy and the interest rate levels, through mechanisms such as the open market operations. They also influence exchage rates between the domestic currency and foreign ones.

Interest rates affect investment levels, which in turn determine GDP figures and economic growth levels. The main objectives of the monetary policy are to ensure high economic growth, high employment levels and price stability (low inflation).

Answer 2

Answer:

The main role of Central bank is to conduct monetary policy to achieve stability in price and further help to manage economic fluctuations. The policies and framework of the central bank have been gone through massive changes over time.

The central bank leads to Monetary policy by controlling the money supply. usually by open market operations. foe example central bank can reduce the money amount by selling the government bonds by sale repurchase agreement by taking money from the commercial bank.