The correct answer is: B. Monetary policy
Monetary policy is the actions taken by a central bank to influence the money supply and interest rates in an economy. The central bank can use monetary policy to achieve a variety of goals, such as controlling inflation, stimulating economic growth, and stabilizing the financial system.
The central bank can influence the money supply by buying and selling government bonds. When the central bank buys government bonds, it injects money into the economy. When the central bank sells government bonds, it takes money out of the economy.
The central bank can also influence interest rates by setting the discount rate and the reserve requirement. The discount rate is the interest rate that the central bank charges banks for loans. The reserve requirement is the percentage of deposits that banks must hold in reserve. When the central bank lowers the discount rate or the reserve requirement, it makes it easier for banks to lend money. This can lead to lower interest rates for consumers and businesses.
Monetary policy can have a significant impact on savings, investments, and consumer spending. When interest rates are low, it is cheaper for businesses to borrow money and invest in new projects. This can lead to higher economic growth. When interest rates are low, it is also cheaper for consumers to borrow money and buy goods and services. This can lead to higher consumer spending.
Fiscal policy is the use of government spending and taxation to influence the economy. The government can use fiscal policy to achieve a variety of goals, such as stimulating economic growth, reducing unemployment, and controlling inflation.
Industrial policy is the government’s use of policies to promote the development of specific industries. The government can use industrial policy to achieve a variety of goals, such as increasing economic growth, creating jobs, and reducing trade deficits.
Foreign exchange policy is the government’s use of policies to influence the value of its currency. The government can use foreign exchange policy to achieve a variety of goals, such as controlling inflation, stimulating economic growth, and stabilizing the financial system.