In the context of factors of production, which of the following best describes the quantity of money supplied?

• A. It is directly determined by the amount of labor employed in the economy.
• B. It is a fixed factor of production like land.
• C. It is determined by the central bank and is not considered a factor of production.
• D. It is determined by the marginal productivity of capital.

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the concept of 'factors of production' in microeconomics. These typically include land, labor, capital, and entrepreneurship, which are inputs used to produce goods and services.
2. Step 2: Recognize that the 'quantity of money supplied' refers to the total amount of money available in the economy, which is controlled by monetary authorities, not by production inputs.
3. Step 3: Analyze each option in the context of factors of production: labor and capital are factors of production, but money itself is not a productive input; it is a medium of exchange.
4. Step 4: Recall that the central bank controls the money supply through monetary policy tools such as open market operations, reserve requirements, and interest rates, independent of labor or capital productivity.
5. Step 5: Conclude that the quantity of money supplied is not a factor of production but is determined by the central bank, making the correct description the one stating that money supply is controlled by the central bank and is not considered a factor of production.