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Central Bank's Reasons to Reduce Borrowing

Question

Explain two reasons why a central bank may want to reduce borrowing.

Category:

Macroeconomic Factors and Policies

Preview Answer

STEPS TO WRITE ESSAY 💡MAIN POINTS💡OVERVIEW

I. Introduction
A. Definition of central bank
B. Importance of central bank in the economy
C. Purpose of the essay

II. Reason 1: To reduce inflation rate
A. Explanation of inflation
B. Relationship between borrowing and inflation
C. How reducing borrowing can help reduce inflation
D. Examples of countries that have successfully reduced inflation through reduced borrowing

III. Reason 2: To reduce current account deficit
A. Explanation of current account deficit
B. Relationship between borrowing and current account deficit
C. How reducing borrowing can help reduce current account deficit
D. Examples of countries that have successfully reduced current account deficit through reduced borrowing

IV. Other reasons for reducing borrowing
A. Over lending by commercial banks
B. Risks to the banking system
C. Examples of countries that have experienced banking crises due to over lending

V. Conclusion
A. Recap of reasons for reducing borrowing
B. Importance of central bank in managing the economy
C. Final thoughts on the topic.

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