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State three areas of responsibility of the European Central Bank (ECB) - Leaving Cert Economics - Question 2 - 2012
Question 2
State three areas of responsibility of the European Central Bank (ECB). (i) (ii) (iii)
Worked Solution & Example Answer:State three areas of responsibility of the European Central Bank (ECB) - Leaving Cert Economics - Question 2 - 2012
Step 1
Price Stability
Answer
The European Central Bank (ECB) plays a crucial role in monitoring inflation within member countries. It adjusts the base ECB interest rate accordingly to influence spending and maintain price stability. This involves analyzing economic trends and making data-driven decisions to ensure that inflation remains within the targeted balance.
Step 2
EU Monetary Policy
Answer
The ECB is responsible for implementing EU monetary policy. This includes monitoring and advising on key indicators such as interest rates, money supply, and credit availability. By managing these factors, the ECB aims to protect the value of the euro and ensure economic stability across the Eurozone.
Step 3
Official Reserves of the Euro Area Countries
Answer
The ECB oversees the official reserves of EU countries, which involves holding and managing various assets such as gold and foreign currencies. These reserves serve as security for the euro's value and play a vital role in managing the currency's issuance. The ECB acts on behalf of member countries to ensure these reserves are effectively managed.