Changes in the money supply to fight recessions or inflations are referred to as what?

• A. Monetary Policy
• B. Fiscal Policy
• C. Tax Policy
• D. Monetary Regulation

Answer: (A)

Monetary policy is the set of actions used to manage the money supply and influence interest rates to influence overall demand in the economy. When the economy slows, central banks often expand the money supply and cut rates to stimulate borrowing and spending. When prices are rising too fast, they tighten the money supply and raise rates to cool demand. This direct use of money and credit conditions is what the question describes, making it the correct term. Fiscal policy, by contrast, uses government spending and taxation to influence the economy; tax policy focuses specifically on taxes; monetary regulation isn’t the standard label for this framework.