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What is the primary mission of a central bank?
ATo collect the taxes owed by banks and their customers
BTo lend directly to households buying their first home
CTo oversee the monetary and credit system of the nation
DTo insure every deposit held at a commercial bank
Answer & Solution
Correct answer: C. To oversee the monetary and credit system of the nation
1. A central bank exists to oversee the monetary and credit system of its country.
2. Alongside that it supports the ongoing operation of the private banking system.
3. Its actions affect the interest rates banks charge, help keep inflation under control and stabilise the financial system.
4. Lending to individual home buyers is the work of commercial banks and thrift institutions, not of the central bank.
_Source: OpenStax Introduction to Business (CC BY 4.0), Ch 15 "Understanding Money and Financial Institutions", section 15.2 The Federal Reserve System_
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