central bank theories

Central bank theories explain how these institutions manage a country’s economy by controlling money supply and interest rates. They aim to maintain stable prices, promote employment, and support economic growth. Different theories include monetary policy, which adjusts interest rates to influence spending and investment, and inflation targeting, which keeps price increases predictable. Some theories focus on stability and controlling inflation, while others prioritize encouraging economic activity. Central banks use tools like setting benchmark interest rates, buying or selling government securities, and adjusting reserve requirements to achieve these goals, ultimately steering the economy toward sustainable growth and stability.