What is the function of a central bank in stabilizing the economy?

The central bank plays a crucial role in stabilizing the economy by implementing various functions. Firstly, it conducts monetary policy to regulate the money supply and promote price stability. Through tools like interest rates and open market operations, it can control inflation and deflation, ensuring a steady and predictable economic environment. Additionally, the central bank acts as a lender of last resort by providing emergency funds to distressed financial institutions, preventing systemic risks and maintaining financial stability. Furthermore, it supervises and regulates the banking system, ensuring its soundness and protecting consumers. Through these measures, the central bank promotes confidence in the financial system, which is vital for economic stability. Overall, the central bank's functions are integral to stabilizing the economy, supporting sustainable growth, and safeguarding against economic shocks.