Question

Explain the role of Central Bank as government's agent and advisor.

Answer 1

Central banks operate as government agents and advisors in the following ways:

1. It keeps and manages the government's accounts, thus performing the same service for the government as private banks do for its customers.
2. It buys and sells securities on behalf of the government as an agent.
3. As a government consultant. It develops policies to govern the money market.
4. It also advises the government on economic problems and assists them in developing various policies.