Class 11 Finance Important Chapter 4 Central Bank

Class 11 Finance Important Chapter 4 Central Bank Solutions English Medium As Per AHSEC New Syllabus to each chapter is provided in the list so that you can easily browse through different chapters ASSEB Class 11 Finance Important Solutions and select need one. AHSEC Class 11 Finance Additional Notes English Medium Download PDF. HS 1st Year Finance Important Solutions in English.

Class 11 Finance Important Chapter 4 Central Bank

Also, you can read the NCERT book online in these sections Solutions by Expert Teachers as per Central Board of Secondary Education (CBSE) Book guidelines. ASSEB Class 11 Banking Additional Question Answer are part of All Subject Solutions. Here we have given HS 1st Year Banking Important Notes in English for All Chapters, You can practice these here.

Central Bank

Chapter: 4

IMPORTANT QUESTION AND ANSWER

Answer the Following Question:

1. What is the role of a central bank as a ‘lender of last resort’?

Ans: The central bank provides financial support to commercial banks facing liquidity crises by rediscounting eligible securities, preventing banking failures.

2. Why does the central bank have a monopoly on currency note issuance?

Ans: To ensure uniform currency circulation, better control of money supply, and public confidence in the monetary system.

3. How does the central bank act as an agent of the government?

Ans: It collects taxes, issues treasury bills, raises loans, and represents the government in international financial institutions.

4. What is meant by ‘control of credit’ by the central bank?

Ans: It regulates the volume and cost of credit to stabilize prices and foreign exchange rates, preventing inflation or deflation.

5. What advantages arise from the central bank acting as a clearinghouse?

Ans: It economizes cash usage, reduces cash withdrawals, and strengthens the banking system through efficient interbank settlements.

6. How does the central bank help maintain exchange rate stability?

Ans: By managing foreign exchange reserves and intervening in forex markets to avoid excessive fluctuations.

7. What is the significance of the central bank holding commercial banks’ cash reserves?

Ans: It provides liquidity, builds public confidence, and allows the central bank to control money supply.

8. Why is the central bank considered the apex monetary institution?

Ans: Because it oversees and regulates the entire banking and monetary system, ensuring its stability and efficiency.

Fill in the Blanks:

1. The central bank has the exclusive right to issue _______ notes in the country.

Ans: Currency.

2. Reserve Bank of India is the _______ bank of India.

Ans: Central.

3. The central bank acts as the _______ of last resort for commercial banks.

Ans: Lender.

4. Control of _______ is a major function of the central bank to maintain economic stability.

Ans: Credit.

5. The central bank manages the country’s reserves of gold and _______ exchange.

Ans: Foreign.

Short Notes:

1. Role as Banker to Government.

Ans: The central bank maintains accounts of the government, advances short-term loans, manages foreign exchange payments, and collects cheques on behalf of the government, acting as its banker and financial agent.

2. Lender of Last Resort.

Ans: When commercial banks face liquidity crises, the central bank provides emergency funding by rediscounting securities, thereby stabilizing the banking system and preventing bank failures.

3. Issue of Currency.

Ans: The central bank has exclusive rights to issue currency notes, ensuring uniformity in currency and controlling money supply, which strengthens public confidence in the financial system.