Monetary policy attempts to affect the overall level of spending through:
A) changes in the inflation rate.
B) changes in the quantity of money and the interest rate.
C) changes in tax policy or government spending.
D) discretionary regulation of profits and wages.

Question

Quizplus · Accepted Answer

Monetary policy primarily involves changes in the quantity of money and the interest rate in order to affect overall spending in an economy. Changes in the inflation rate may be a consequence of changes in monetary policy, but it is not the primary goal. Tax policy and government spending are more closely associated with fiscal policy, rather than monetary policy. Discretionary regulation of profits and wages is not typically a part of monetary policy.

Monetary Policy Attempts to Affect the Overall Level of Spending