The use of interest rates to control the money supply is a

Step 1: Analyze the question The question asks what type of policy is being described when interest rates are used to control the money supply.

Step 2: Explain the concept

• Monetary policy refers to the actions taken by a country's central bank (in Nigeria, the Central Bank of Nigeria, CBN) to regulate the money supply, credit availability, and interest rates in order to achieve economic goals such as price stability, full employment, and growth. • Tools include: the Monetary Policy Rate (MPR), the Cash Reserve Ratio (CRR), open market operations (OMO), liquidity ratio, and moral suasion.
• Fiscal policy is the government's use of taxation, public spending, and borrowing to influence the economy. It is handled by the Ministry of Finance, not the central bank.
• Developmental policy focuses on long-term national growth through things like infrastructure, industrialization, and education planning.
• "Control policy" is not a standard economic term.

Step 3: Work through the solution

1. The question mentions interest rates, which are a key tool of the central bank.
2. The goal is to control the money supply, which is the main aim of monetary authorities.
3. A higher interest rate makes borrowing expensive, so people borrow less and the money supply shrinks. A lower interest rate encourages borrowing, so the money supply expands.
4. This is the work of the CBN, so it is monetary policy.

Step 4: Answer The correct option is B. monetary policy.

Step 5: Exam tip Remember the pairing:

• Monetary = Money supply, MPR, interest rates (central bank)
• Fiscal = Funds from taxes and government spending (Ministry of Finance)

Whenever you see interest rates, CRR, or money supply in a question, think monetary policy.