CFA Level I · CFA Level I Exam · Monetary Policy
Which of the following is most likely a core function of a central bank?
Acting as banker to the government is a core central bank function. Central banks also issue currency, serve as lender of last resort and conduct monetary policy, whereas tax rates are set by fiscal authorities and bond underwriting is done by investment banks.
- AActing as banker to the governmentCorrect
- BSetting corporate tax rates
- CUnderwriting private company bond issues
Explanation
Central banks act as the banker to the government and to commercial banks, and they issue currency and conduct monetary policy. Setting tax rates is a fiscal authority function, and underwriting private bonds is an investment banking activity.
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