Question

Which of the following best describes monetary policy?
O
A. Determining the design printed on the national currency
O
B. Managing the economy by controlling the money supply
O
C. Raising and lowering the foreign exchange rate
O
D. Regulating transactions in the currency exchange market

Answer 1

Answer:

B. Managing the economy by controlling the money supply.

Explanation:

• Monetary policy is one of the tools that governments have to influence economy.
• It is usually implemented by central banks (in USA, by the FED), and   it consists on using available instruments (like  bonds' supply, rediscount rates, money supply, etc), to exert controll over the supply of money, and the interest rates (when possible), in order to achieve specific goals, like controlling inflation.