Explanation

Correct Answer: A

Why A is correct:

• Fiscal policy refers to government decisions about taxation and spending, which is typically implemented by the government (treasury/finance ministry) rather than the central bank.
• Central banks are primarily responsible for monetary policy (interest rates, money supply), not fiscal policy.

Why B is incorrect:

• Central banks do oversee payment systems to ensure financial stability and smooth functioning of the economy's payment infrastructure.

Why C is incorrect:

• Central banks typically manage foreign currency reserves as part of their role in maintaining exchange rate stability and international financial operations.

Key Concepts:

• Central Bank Functions:
  1. Monetary policy implementation
  2. Banker to the government
  3. Banker to commercial banks
  4. Currency issuer
  5. Foreign exchange management
  6. Payment system oversight
• Fiscal Policy: Implemented by government through budget decisions on taxation and expenditure.
• Monetary Policy: Implemented by central bank through interest rates, reserve requirements, and open market operations.