Question

_____ is when the central bank uses money supply and interest rates to affect a country's economy.

Answer 1

The Answer Is Monetary Policy. Monetary Policy Is implemented by a central bank.

Answer 2

The correct answer is: "monetary policy".

Central banks, such as the Federal Reserve, are in charge of designing and applying the monetary policy, which consists on influencing the amount of money in circulation in the economy and the interest rate levels, through mechanisms such as the open market operations.

Interest rates affect investment levels, which in turn determine GDP figures and economic growth levels. The main objectives of the monetary policy are to ensure high economic growth, high employment levels and price stability (low inflation).