Certified Residential Appraiser Practice Exam

What encompasses the central bank's actions to regulate economic activity via money availability?

1. Fiscal Policy

2. Monetary Policy

3. Supply Chain Policy

4. Investment Policy

The correct answer is: Monetary Policy

Monetary policy encompasses the central bank's actions to regulate economic activity through managing the availability of money and credit in the economy. This approach involves the use of tools such as interest rates, open market operations, and reserve requirements to influence the level of money supply and credit conditions. By adjusting these factors, the central bank can promote economic growth, control inflation, and stabilize the currency. In contrast, fiscal policy involves government spending and taxation decisions made by legislative bodies to influence economic conditions, while supply chain policy focuses on the flow of goods from producers to consumers, and investment policy pertains to strategies regarding asset allocation and investment management. Each of these areas has its own distinct objectives and methodologies, which are fundamentally different from the core functions of monetary policy.