The main functions of a central bank
A central bank, like the Bank of England, manages a country's money supply, sets interest rates, and keeps the financial system stable. It acts as the government's bank and as a backstop for commercial banks in a crisis.
Real World
During the 2008 financial crisis, the Bank of England acted as lender of last resort by providing emergency liquidity to banks like RBS to prevent a complete collapse of the UK banking system.
Exam Focus
For 'explain' questions, link each central bank function to a specific macroeconomic objective such as price stability or financial stability.
Price Elasticity of Demand
PED = % change in quantity demanded ÷ % change in price
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