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Central banks play a crucial role in modern economies by managing the country's money supply and interest rates. Their primary goals include controlling inflation, managing
Central banks play a crucial role in modern economies by managing the country's money supply and interest rates. Their primary goals include controlling inflation, managing employment levels, and ensuring the stability of the financial system. One of the key functions of a central bank is to act as a lender of last resort to the banking sector during times of financial distress. This means that they provide liquidity to banks to prevent panic and bank runs. Additionally, central banks influence the economy through monetary policy, which involves adjusting interest rates to either stimulate or cool down economic activity. Lowering interest rates can encourage borrowing and investing, while raising rates can help to control inflation. Central banks also have a regulatory role, overseeing the banking sector to ensure that financial institutions operate safely and soundly. Given their significant influence, central banks are often considered independent from the government to prevent political interference in economic decisionmaking.
Which of the following best describes the primary goals of a central bank?
A Enforcing tax laws and fiscal policies
B Managing the country's military expenditures
C Controlling inflation, managing employment, and ensuring financial stability
D Setting international trade policies
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