What is a Central Bank?
Definition of Central Bank: This bank is considered as a financial organization like the Federal Reserve System in U.S. This bank regulates the dimension of the money supply of a nation, the accessibility and price of the credit is worth its currency. Generally, this bank plays the role of a fiscal agent who works for their particular government. The other responsibilities of this bank is to issue notes that are further utilized as a legal tender, supervises the safety of the commercial banks and implements monetary policy. By raising or by lowering the supply of credit and money, this bank affects the interest rates which in turn influences the economy. The central banks also regulate the supply of cash through market intervention. Market intervention is explained as the act of purchasing and selling the government securities. Interventions may also increase or lower the rate of discount for regulating the exchange by the commercial banks. By making adjustments in the reverse need, the less amount of cash reserves that the banks must grasp against the liabilities of the deposit, contract of the central banks and inflate the supply of cash. Their main aim is to maintain the different conditions that offer support to a raised employment level and stable domestic costs with less inflation. These banks also participate in the cooperative currency arrangements made for stabilizing or regulating the rates of foreign exchange.