Question

The Central Bank is the sole currency issuing authority of an economy.

Hint:

The Central Bank controls the money supply by issuing currency while money's role in deferred payments helps in credit-based economic activities.

Answer 1

Understanding the Role of the Central Bank: The Central Bank of a country, such as the Reserve Bank of India (RBI), has the exclusive authority to issue currency notes.
Justification:
- This monopoly ensures uniformity in the issuance of currency, preventing counterfeiting and maintaining trust in the monetary system.
- It enables the Central Bank to regulate the money supply, which is crucial for controlling inflation and stabilizing the economy.
- By issuing currency, the Central Bank also manages foreign exchange and monetary policy efficiently.
Conclusion: Thus, the Central Bank being the sole issuer of currency is essential for maintaining financial stability in an economy.