Social Studies 30-2 Diploma Practice Test

Monetary policy is centered around the control of a country's money supply and interest rates, implemented by a nation's central bank, such as the Federal Reserve in the United States or the Bank of Canada. This approach is utilized to influence economic activity, targeting inflation, employment rates, and overall economic stability. By adjusting interest rates, the central bank can encourage or discourage borrowing and spending by businesses and consumers, which directly impacts economic growth and inflation levels.

In contrast, fiscal policy pertains to government spending and taxation decisions, aiming to influence economic activity through budgetary measures. Supply-side policy focuses on increasing productivity and economic growth by enhancing factors like labor and capital, rather than directly managing money. Trade policy involves regulations and agreements that influence a country's trading relationships with other nations, but it does not directly involve the management of money supply or interest rates.

Thus, the emphasis on the management of interest rates and money supply clearly aligns with monetary policy, making it the correct response in this context.