The Influence of Central Banks

Central banks are typically government-managed or sponsored and play a significant role in some countries' banking systems. The Federal Reserve Bank in the United States sets things such as interest rates, which influence borrowing costs. Read this section and complete the exercises at the end.

Review Questions

  1. How is a central bank different from a typical commercial bank?
  2. List the three traditional tools that a central bank has for controlling the money supply.