Question

State with reasons whether you agree or disagree with the following statements.
Central Bank has control on credit creation.

Answer 1

Yes, I do agree with this statement.

The control or adjustment of credit of commercial banks by the central bank is its important function.

Commercial banks create lot of credit which sometimes results in inflation. The expansion or contraction of currency and credit causes business fluctuations.

The need for credit control arises from the fact that money and credit play an important role in determining the level of incomes, output and employment.