Which of the following is a role of central banks?

• A. Providing a depositors' protection scheme for bank deposits
• B. Controlling the money supply
• C. Issuing government bonds directly to investors
• D. Setting corporate tax rates

Answer: (B)

Central banks shape the money available in the economy to steer inflation and economic activity. They manage liquidity and monetary conditions through tools like policy interest rates, reserve requirements, and open market operations, which can expand or contract the money supply as needed. This function—managing how much money is circulating—is what central banks do to influence overall economic conditions.

The other functions listed belong to different parts of the system: providing a depositors’ protection scheme is typically a government-backed safeguard for savers; issuing government bonds directly to investors is the government’s debt management role; and setting corporate tax rates is fiscal policy decided by government authorities.