Question

Justify the following statements with valid arguments:
(i) Money supply in an economy is an example of a stock variable.
(ii) The Central Bank provides several Banking services to the government.

Hint:

Stock variables are measured at a point in time, while flow variables are measured over a period. Understanding the difference helps in analyzing economic data effectively.

Answer 1

1. Money supply is a stock variable: Money supply is a stock variable as it represents the total money in an economy at a specific moment. Unlike flow variables (e.g., income, expenditure) measured over time, stock variables are static unless influenced externally, such as by central bank policy.
2. Central Bank offers various banking services to the government: The Central Bank functions as the government's banker, providing services like managing government accounts, issuing/managing securities, handling public debt, and processing government payments and receipts to ensure efficient financial operations.