Question-   The role of the central bank in handling the economic crisis.

Solution-

"The role of the central bank in handling economic crisis”

A central bank of a country is a public institution that manages the currency, and the supply of money, the amount in circulation.It is a financial institution, responsible for overseeing the monetary system and policy. Interest rates, credit allocation, and some other sectors are also controlled by the central bank. However, the core objective of most central banks isprice stability.

When the economy of a country experiences a sudden fall brought on by a financial crisis is the economic crisis. An economy in crisis will most likely experience a fall in GDP, a drying up of liquidity, and instability in pricing due to inflation/deflation. This ultimately leads to a recession.

In an economic crisis of a country, the central bank has a role to play in handling the economic crisis.

Assessing the crisis:It is said that every crisis is unique. But these also have some similarities. The central bank must assess the crisis and determine these factors to take future actions.

Designing an exclusive policy:In order to survive and decrease the damage of the crisis, an exclusive monetary policy is needed. It is expected that business can end up with totally new results this time and new business also gets started at this time. A policy must be designed to minimize hampers and maximize opportunities.

Interest Rate:In an economic crisis, the buying power of the public decreases, people need to take a loan from banks in order to sustain the crisis. Even for small businesses and other organizations, it may get tough to sustain. Changing the interest rates to help those people should be done by the central bank.

Liquidity maintaining:In a crisis, many fall short of cash money. It is important to maintain the proper rate of liquidity of money. Everyone tends to get access to their cash, which is right. But too much liquidity is harmful to the economy. So, the central bank tries to keep a balance in this rate.

Support:Many people, organizations suffer in a crisis. It is the job of the central bank to address this and ensuring the flow of money among the banks to support them.

Staying alert and continuous analyzing:The central bank must continuously analyze the economy, and address the changes. Along with this, supporting the government to keep the economy moving.

Support:Many people, organizations suffer in a crisis. It is the job of the central bank to address this and ensuring the flow of money among the banks to support them.

Staying alert and continuous analyzing:The central bank must continuously analyze the economy, and address the changes. Along with this, supporting the government to keep the economy moving

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