Which policy is not managed by the government and is aimed at influencing aggregate demand?

• A. Fiscal policy
• B. Expansionary monetary policy
• C. Monetary policy
• D. Productivity policy

Answer: (C)

Monetary policy is the set of actions used to influence the overall demand in the economy by changing the money supply and interest rates. In Australia and many other economies, the central bank conducts this policy and operates with a degree of independence from the government. Because it’s run by the central bank rather than a government department or ministry, it’s not directly managed by the government, even though the government may set goals like price stability or growth.

This policy aims to influence aggregate demand by making borrowing cheaper or more expensive, which affects consumption and investment. A specific form of it is expansionary monetary policy, which uses tools like lower interest rates to boost demand. The other options are more directly controlled by government decisions: fiscal policy is about government spending and taxation, and productivity policy focuses on long-term improvements in efficiency and output through public programs and regulations.

So the policy category that isn’t managed by the government and is aimed at influencing aggregate demand is monetary policy.