Question

What is the role of the central bank and the prudential supervisor?

Option 1: Central bank manages monetary policy, prudential supervisor oversees financial institutions
Option 2: Central bank regulates fiscal policy, prudential supervisor monitors stock markets
Option 3: Central bank handles foreign exchange, prudential supervisor oversees credit unions
Option 4: Central bank manages government budgets, prudential supervisor monitors insurance companies

Answer 1

The central bank manages monetary policy and the prudential supervisor oversees financial institutions.

Step-by-step explanation:

The role of the central bank is to manage monetary policy, which involves decisions about the money supply, interest rates, and credit conditions. It aims to influence macroeconomic policy, such as low unemployment and low inflation. Some prominent central banks include the U.S. Federal Reserve, the European Central Bank, the Bank of Japan, and the Bank of England.

The role of the prudential supervisor is to oversee financial institutions and regulate all or part of a nation's banking system. This includes protecting bank depositors and ensuring the health of the banks' balance sheets. The prudential supervisor's responsibility is to monitor and maintain the stability of the financial system.