Question

When a central bank influences the growth of the money supply, it is carrying out _____. monetary policy fiscal policy

Answer 1

monetary policy

Step-by-step explanation:

When a central bank influences the growth of the money supply, it is carrying out monetary policy.

By definition, monetary policy is the policy adopted by the monetary authority of a nation to control either the interest rate payable for very short-term borrowing or the money supply, often as an attempt to reduce inflation or the interest rate, to ensure price stability and general trust of the value and stability of the nation's currency.

Answer 2

The correct answer is: "monetary policy".

The monetary policy is the mechanism through which the central bank is able to indirectly influence the economic output and its growth trends, by changing the amount of money in circulation in the economy, the so-called money supply.

The are several instruments that the monetary authorities can use to modify the money supply levels: changing the interest rate, modifying the mandatory coefficient of reserves of the banking system, purchasing or selling public debt, etc.