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Question
Assertion (A): Central Bank and Commercial Banks have distinct roles in economy.
Reasoning (R): Central Bank controls money supply and sets policy. Commercial Banks take deposits and make loans to customers.
Options
A is true but R is false.
A is false but R is true.
Both A and R are true and R explains A.
Both A and R are true but R does not explain A.
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Solution
Both A and R are true and R explains A.
Explanation:
The assertion is true because central banks and commercial banks serve very separate, specialized responsibilities within the financial system. The reasoning correctly justifies this assumption by outlining their various operational roles, emphasizing that, while the central bank operates as a regulatory agency in charge of macroeconomic policy, commercial banks serve as public intermediaries for individual retail deposits and loans.
