How do central banks influence economic stability?

How do central banks influence economic stability?

Central banks influence economic stability through monetary policy, controlling interest rates, and regulating money supply.

Can you explain how interest rates affect inflation?

Certainly! When central banks raise interest rates, borrowing becomes more expensive, which can reduce spending and lower inflation.

What tools do central banks use to manage the economy?

Central banks use tools like open market operations, reserve requirements, and discount rates to manage economic activity.

How do central banks respond to a financial crisis?

In a financial crisis, central banks may lower interest rates, provide liquidity to banks, and implement quantitative easing to stabilize the economy.

What is the role of central banks in a recession?

During a recession, central banks aim to stimulate the economy by lowering interest rates and encouraging lending and investment.