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THE CENTRAL BANK - Coggle Diagram
THE CENTRAL BANK
1. OVERVIEW
USUALLY GOVERNMENT'S OWNED-BANKS, RESPONSIBLE FOR THE NATIONAL INTEREST
4 MAIN FUNCTIONS
Banker's bank
Monetary management
Government’s banker
Issuer of currency
THE FOREMOST MONETARY INSITUTION IN A MARKET ECONOMY
2. MONETARY POLICY
CENTRAL BANK CONTROLS ECONOMIC GROWTH BY REGULATING THE LIQUIDITY
3 MAIN TOOLS
Reserve requirement
Expansionary policy
Contractionary policy
Open market operations
Buy securities → inject money into the system → stimulate growth
Sell securities → withdraw money → control inflation
Interest rates
Increase the rate → discourage borrowing → tighten the economy
Decrease the rate → encourage borrowing → stimulate growth
SOME NOTES
Time
Excessive expansion