Question

What does monetary policy do?

a. it charters new banks.
b. it mints new coins and prints bills.
c. it changes the way that taxes are collected.
d. it alters the supply of money.

Answer 1

Monetary policy refers to the actions taken by the central banking system, such as the Federal Reserve, to regulate the supply of money. It involves managing interest rates, and credit conditions, and influencing the allocation of resources such as capital and labor in the economy.

Step-by-step explanation:

Monetary policy refers to the actions taken by the central banking system, such as the Federal Reserve, to regulate the supply of money. It involves managing interest rates, and credit conditions, and influencing the allocation of resources such as capital and labor in the economy.

The Federal Reserve implements monetary policy through tools such as open market operations (buying and selling government bonds), reserve requirements (determining the level of reserves banks must hold), and discount rates (the interest rate charged by the central bank on loans to commercial banks).

By altering the supply of money, monetary policy can influence the cost of credit and ultimately impact various sectors of the economy.