What is a primary responsibility of a central bank?

A primary responsibility of a central bank is managing the country's currency and money supply. Central banks play a crucial role in the economy by controlling how much money is in circulation and ensuring that the financial system operates smoothly. This involves implementing monetary policy, which includes adjusting interest rates and using various tools to influence the availability of credit.

By managing the money supply, central banks aim to achieve key economic objectives such as price stability, promoting employment, and fostering economic growth. The stability of the currency and the overall economic environment is vital for maintaining public confidence in the financial system, as well as for facilitating trade and investment within and outside the country.

While regulating consumer prices indirectly occurs through monetary policy, it is not a primary responsibility. Central banks do not set prices for individual goods and services—this is determined by market forces. Moreover, controlling fiscal policy, which relates to government spending and taxation, falls within the domain of government rather than the central bank. Thus, managing the currency and money supply represents the essential function of a central bank in the broader economic context.