The Central Bank is obliged to back the currency with assets of equal value. These assets usually consist of gold coin, gold bullion, foreign securities and the domestic government’s local currency securities. The country’s Central government is usually authorised to borrow money from the central bank. Government does this, by selling local currency securities to the central bank. When the central bank acquires these securities, it issues currency. Putting and withdrawing currency into and from circulation is also the job of the central bank.
All the currency issued by the central bank is its monetary liability. How?
Answers
Jatin Kumar
The Central Bank is obliged to back the currency with assets of equal value. These assets usually consist of gold coin, gold bullion, foreign securities and the domestic government’s local currency securities. The country’s Central government is usually authorised to borrow money from the central bank. Government does this, by selling local currency securities to the central bank. When the central bank acquires these securities, it issues currency. Putting and withdrawing currency into and from circulation is also the job of the central bank.