What economic policy is typically associated with the goal of stabilizing an economy through control of the money supply?

The correct answer, monetary policy, directly pertains to the management of a country's money supply and interest rates, which are critical tools used by a nation's central bank to influence economic activity. By adjusting the money supply, monetary policy aims to promote economic growth, limit inflation, and stabilize the currency.

In times of economic downturn, a central bank may increase the money supply or lower interest rates to encourage borrowing and investment. Conversely, if inflation is rising, the central bank might reduce the money supply or raise interest rates to curb spending and stabilize prices. This targeted control of the money supply and interest rates is essential for smooth economic functioning.

Other economic policies, such as fiscal policy, focus on government spending and taxation decisions to influence economic conditions. Although they can also have stabilizing effects on the economy, they do not directly involve the control of the money supply in the manner that monetary policy does.