Monetary policy helps control inflation by?

Monetary policy plays a crucial role in managing economic stability, particularly in controlling inflation. The primary mechanism for achieving this goal is through the regulation of the money supply. When a central bank, such as the Federal Reserve in the United States, adjusts the amount of currency and credit available in the economy, it directly influences interest rates, borrowing, spending, and investment behaviors.

By increasing the money supply, central banks can stimulate the economy, but if this increase is too rapid or excessive, it can lead to higher inflation as more money chases the same amount of goods and services. Conversely, if the central bank restricts the money supply, it can slow down economic activity and help reduce inflationary pressures. This balancing act is central to monetary policy and highlights why regulating the money supply is the correct answer when discussing how monetary policy helps control inflation.

The other options do not directly address the mechanism of monetary policy in controlling inflation. Encouraging rent control might help stabilize housing costs temporarily but does not influence the broader money supply or economic conditions directly. Reducing taxes can stimulate spending but does not regulate the money supply; in fact, it could potentially enhance inflationary pressures if the money supply remains unchanged. Refusing to balance the budget doesn't align with the