Central banks regulate money supply and interest rates

Steps:

• Recall that central banks, like the Federal Reserve, oversee a nation's financial system.
• Identify core functions: controlling inflation, stabilizing currency, and promoting economic growth.
• Match options to functions: evaluate which aligns with monetary tools like interest rates and reserve requirements.
• Select the option that directly involves these tools.

Why C is correct:

• Central banks implement monetary policy by adjusting interest rates and money supply, as defined in economic law (e.g., Federal Reserve Act mandates this role).

Why the others are wrong:

• A: Commercial banks accept public deposits; central banks do not.
• B: Governments, not central banks, determine tax rates via fiscal policy.
• D: Commercial banks lend to businesses; central banks lend to other banks as lender of last resort.

Final answer: C