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Outline THREE functions/responsibilities of the European Central Bank (ECB) - Leaving Cert Economics - Question 5 - 2007
Question 5
Outline THREE functions/responsibilities of the European Central Bank (ECB). (i) (ii) (iii) (16 marks)
Worked Solution & Example Answer:Outline THREE functions/responsibilities of the European Central Bank (ECB) - Leaving Cert Economics - Question 5 - 2007
Step 1
Maintain Price Stability
Answer
The ECB is responsible for maintaining price stability in the Eurozone. This involves monitoring inflation rates in member countries and adjusting the base ECB interest rate accordingly. By controlling inflation, the ECB aims to ensure a stable economic environment that promotes sustainable growth.
Step 2
Implements EU's Monetary Policy
Answer
The ECB implements the European Union's monetary policy by advising on and monitoring key financial variables such as interest rates, money supply, and credit availability. This role is crucial for protecting the value of the euro and ensuring economic stability across member states.
Step 3
Holds and Manages Official Reserves
Answer
The ECB holds and manages the official reserves of the Euro area countries. These reserves may include gold, foreign currencies, and other assets, which serve as security against the issuance of euro currency. The ECB effectively manages these reserves on behalf of the Eurozone countries to support economic stability.