Central banks are really important when it comes to helping the economy, especially during tough times. They use different tools to keep things stable. Their main goals are to keep prices steady, control inflation, and help the economy grow.

1. Managing Interest Rates:

• Central banks change interest rates to affect how much people borrow and spend.
• For example, when the economy is struggling, they might lower interest rates so people are more likely to spend money.
• In Sweden, the Riksbank made interest rates very low in 2015 to help with low inflation and slow growth.
• In 2023, when interest rates drop by 1%, investment and consumption usually go up by about 2%, which helps grow the economy.

2. Controlling the Money Supply:

• Central banks can also change how much money is in circulation by buying or selling government bonds.
• When they increase the money supply, it can lower interest rates, making it easier for people to spend.
• For example, during the COVID-19 pandemic, many central banks, including Sweden's Riksbank, bought a lot of bonds.
• This action raised the money supply by around 10% in Sweden from 2019 to 2021.

3. Helping During Crises:

• When there is a global financial crisis, central banks can help by lending money to banks to stop them from failing.
• For instance, in 2008, the Federal Reserve in the U.S. lent over $800 billion to help stabilize banks.

In short, central banks use interest rates, manage the money supply, and step in during crises to keep the economy steady. Their efforts are really important for promoting stability and growth in the economy.