QuestionJune 1, 2025

Which of the following best describes a monetary policy tool? A interest rates B taxes C household savings D government spending

Which of the following best describes a monetary policy tool? A interest rates B taxes C household savings D government spending
Which of the following best describes a monetary policy tool?
A interest rates
B taxes
C household savings
D government spending

Solution
4.6(269 votes)

Answer

(A) interest rates Explanation 1. Identify Monetary Policy Tools Monetary policy tools are used by central banks to control the money supply and interest rates in an economy. 2. Evaluate Options (A) Interest rates are a primary tool of monetary policy, used to influence economic activity. (B) Taxes are related to fiscal policy, not monetary policy. (C) Household savings are influenced by monetary policy but are not a tool themselves. (D) Government spending is part of fiscal policy, not monetary policy.

Explanation

1. Identify Monetary Policy Tools<br /> Monetary policy tools are used by central banks to control the money supply and interest rates in an economy.<br /><br />2. Evaluate Options<br /> (A) Interest rates are a primary tool of monetary policy, used to influence economic activity.<br /> (B) Taxes are related to fiscal policy, not monetary policy.<br /> (C) Household savings are influenced by monetary policy but are not a tool themselves.<br /> (D) Government spending is part of fiscal policy, not monetary policy.
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