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What is the primary function of a central bank?
What is the primary function of a central bank?
- Issuing currency and providing banking services to the government
- Facilitating international trade and foreign exchange transactions
- Regulating the money supply and interest rates (correct)
- Providing loans to small businesses and individuals
How does fractional reserve banking work?
How does fractional reserve banking work?
- Banks only lend money to individuals with high credit scores
- Banks hold a fraction of their deposits as reserves and lend out the rest (correct)
- Banks are required to maintain 100% of their deposits as reserves
- Banks lend out more money than they have in reserves
What is the role of the Federal Reserve in the U.S. banking system?
What is the role of the Federal Reserve in the U.S. banking system?
- Issuing currency and managing government budgetary operations
- Facilitating international trade and exchange rate stability
- Providing insurance for bank deposits and overseeing consumer protection laws
- Controlling the money supply and regulating banks to ensure financial stability (correct)
What is the purpose of the deposit insurance scheme established by many countries?
What is the purpose of the deposit insurance scheme established by many countries?
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