Central banking is a branch of banking that is not controlled by any particular bank but is rather governed by a set of principles. These principles generally include a wide-ranging view of the role of banks in society, their obligations to society, the need for stable financial institutions, and the need for flexible exchange rates. In addition to these general principles, there are many other specific principles of central banking. Central banks play a vital role in the economy. They use their central banking power to respond to changes in the domestic money supply or in the interest rates. Central banks control both the volume of currency in circulation and the rate of interest it should be able to offer to individuals and businesses. In fact, central banking plays a key role in the functioning of the economy. There are two general categories of central banking systems. One is direct central banking. In this system, banks lend their loans directly to borrowers. The second is market-...
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