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Questions
Give two reasons why the central banks enjoy monopoly of note issue.
Explain currency authority function of the Central Bank.
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Solution
The central bank is the sole authority for the issue of currency in the country. All the currency issued by the central bank is its monetary liability. Notes issued by the central bank are circulated as legal tender money.
Two Reasons:
The monopoly of issuing notes promotes efficiency in the financial system because:
- It brings about uniformity in currency note circulation.
- It gives the Central Bank direct control over one of the components of the money supply.
RELATED QUESTIONS
Which of the following is not a function of the Central Bank?
Assertion (A): Central bank as a banker to the government, works as a custodian of foreign exchange reserves.
Reason (R): The Central bank acts as a Clearing house for the transfer and settlement of mutual claims of commercial banks.
The RBI settles claims of other commercial banks by a process of book entries. It helps to stabilize the banking system in the economy. Which function of the Central bank is explained here.
- In the realm of economic development, how does the role of entrepreneurs impact the overall growth and stability of a nation.
Which of the following is not a function of a commercial bank?
The central bank acts as ______.
Which of the following statements are true?
- The Reserve Bank of India is the central bank of the country.
- All currency notes (except one rupee note) bear the signature of Governor, RBI.
- The objective of the Reserve Bank of India is to earn profit.
Read the following statements - Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): Central Bank acts as a banker to the Government.
Reason (R): Except the one rupee note, all other currency notes bear the signature of Governor of RBI.
How does the central bank act as a lender as the last resort?
Explain the following function of the central bank of a country.
Developmental functions.
