Question

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

Answer 1

The correct answer is letter "B": changes in the quantity of money and the interest rate.

Step-by-step explanation:

Monetary policy is the action taken by the central bank to influence the country's money supply and the economy as a whole by changing interest rates. The Federal Reserve (Fed) establishes monetary policy in the United States. The Fed aims to ensure that the supply of money does not grow too rapidly and induces excessive inflation or reduces economic growth.

Answer 2

The answer is B. changes in the quantity of money and the interest rate

Step-by-step explanation:

Monetary policy is the central bank activities that are directed towards influencing the quantity of money and credit which interest rate affects in an economy.

Through the setting of interest rate, a central bank can manipulate the amount of money in the money market which will affect the overall spending. If central bank increases interest rate, commercial bank will increase their interest rate too, people and business will be discouraged from borrowing from bank and this makes spending reduce.

Also, the central bank can control the quantity (supply) of money by engaging in open market operation. For example, if it wishes to increase the supply of money, it will buy government bond from the commercial banks.