Practicing Success
Which of the following function is not performed by the central bank ? |
Issues currency Controls money supply Money creation Banker to the government |
Money creation |
The correct answer is option (3) : Money creation Money creation is primarily associated with commercial banks, not central banks. Commercial banks create money through the process of lending and the creation of demand deposits. Central banks, on the other hand, influence the money supply through tools like setting interest rates and controlling the money supply but do not directly engage in the process of creating money in the same way that commercial banks do. All other options are the functions of the Central Bank. |