Central banks have a big impact on our everyday lives, even if we don’t see it right away. Here’s how they influence things through something called monetary policy:

1. Interest Rates: Central banks decide interest rates, which is like the cost of borrowing money.

   • When they lower interest rates, it’s cheaper to get a loan.

   • This might help you decide to buy that new phone or car because the payments are easier to handle.

   • But if they raise the rates, borrowing money gets more expensive.

   • This could make you think twice about making big purchases.

2. Money Supply: Central banks also control how much money is available in the economy.

   • If they choose to add more money, people and businesses may spend more.

   • This could help create more jobs or improve salaries.

   • However, if there’s too much money and not enough things to buy, prices can go up, which is called inflation!

In short, what central banks do with interest rates and the money supply can really affect our economy.

This shapes how much we spend, save, and invest.

Everything is connected!