Matching Economic Roles to Institutions

Steps:

• Identify roles of central vs. commercial banks in economy.
• Central banks control monetary policy, including inflation.
• Commercial banks handle private lending and deposits, not national policy.
• Evaluate each option for accurate linkage.

Why A is correct:

• Central banks, like the Federal Reserve, use tools such as interest rates to regulate inflation per monetary policy mandates.

Why the others are wrong:

• B: Commercial banks serve private clients; government accounts are managed by treasury or central bank.
• C: Tax rates are set by government fiscal authorities, not commercial banks.
• D: Foreign reserves are held and safeguarded by central banks, not commercial ones.

Final answer: A