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If a central bank focuses on preventing either high inflation or deep recession by using a low and reasonably steady interest rate policy, then: foreign investment will increase significantly.
What are the main functions of the central bank?
Implementing monetary policy and managing the money supply are the responsibilities of central banks, which are frequently tasked with preserving low inflation and steady GDP growth. To manage the cost of borrowing and lending across an economy, central banks have an impact on interest rates and take part in open market activities.
A central bank's four primary duties are as follows. The base rate is set, open market operations are used to control the money supply, reserves are maintained by banks, and the nation's foreign exchange reserves are all under government control.
Foreign investment will rise significantly if a central bank uses a low and reasonably consistent interest rate strategy to avert either severe inflation or a deep recession.
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