Final answer:
Government attempts to manage the economy by changing the money supply are known as monetary policy, a central bank tool used to influence the money supply and interest rates to promote economic stability.
The correct option is D.
Step-by-step explanation:
Governments attempt to control the economy by changing the money supply through what is known as monetary policy. This refers to the set of tools available to a central bank—for example, the Federal Reserve in the United States—to manage the amount of money in the national economy and oversee the levels of interest rates.
Monetary policy is used in various ways; if a recession is looming, an expansionary monetary policy might be implemented to increase the money supply, enhance the quantity of loans, decrease interest rates, and shift aggregate demand to the right.
Conversely, to combat inflation, a contractionary monetary policy could be enacted to lower the money supply, reduce the number of loans, increase interest rates, and shift aggregate demand to the left. These actions differ from fiscal policy, which relates to government decisions on taxation and spending to adjust aggregate demand.
The correct option is D.