explain the following function of the central bank (a) contrller of credit (b) lender of last resort
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(a) controller of credit
One of the functions of the central bank is the controlling of credit, which in turn controls the inflation rate within the economy. It is important to understand that the central bank cannot prevent or eradicate the inflation rate. However, they do monitor and control credit rates.
(b) lender of last resort
When a commercial bank faces financial crisis and fails to obtain funds from other sources, then the central bank plays the vital role of 'lender of last resort' and provides them with the financial assistance in the form of credit. This role of the the central bank saves the commercial bank from bankruptcy.
Explanation:
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