Economic Policy Questions
The role of central banks in monetary policy is to control and regulate the money supply and interest rates in an economy. They use various tools such as open market operations, reserve requirements, and discount rates to influence the lending and borrowing activities of commercial banks. Central banks aim to maintain price stability, promote economic growth, and ensure financial stability by managing inflation, controlling the money supply, and stabilizing exchange rates. Additionally, they act as lenders of last resort, providing liquidity to banks during times of financial crisis.