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What You Need To Know About Economics by George Buckley, Sumeet Desai

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CHAPTER 6

CENTRAL BANKING

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  • What the role of central banks is in the economy
  • How central banks change interest rates
  • How interest rates affect the economy
  • Why central banks target inflation
  • What happens when interest rates get near zero
  • How quantitative easing can boost the economy

WHAT DO CENTRAL BANKS DO?

Central banks are essentially the money managers of an economy. They are responsible for monetary policy. By this we mean they try to control the supply and value of money by issuing bank notes or setting interest rates. This is a vital role because as we saw in Chapter 5 money and credit form the very lifeblood of modern economies. If money ...

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