What is one responsibility of a central bank?

One of the primary responsibilities of a central bank is controlling the money supply of a country. This function is crucial because it directly influences economic stability and growth. By managing the availability of money and credit in the economy, a central bank can affect inflation rates, employment levels, and overall economic activity.

Central banks, through their monetary policy tools such as interest rate adjustments and open market operations, determine how much money is circulating in the economy. For example, if the central bank wants to stimulate economic growth, it might lower interest rates, making borrowing cheaper, which can encourage spending and investment. Conversely, to combat inflation, it may increase interest rates to reduce the amount of money in circulation.

This responsibility not only helps in maintaining economic stability but also plays a significant role in maintaining public confidence in the national currency. Other functions of central banks may include overseeing the payment system, acting as a lender of last resort, or maintaining foreign currency reserves, but controlling the money supply remains one of the most critical functions for managing the nation's economy effectively.