Monetary Theory is the study of how money functions in an economy, focusing on its role in influencing economic activity, inflation, and interest rates. It examines how the supply of money, controlled by institutions like central banks, affects overall economic performance and stability. Key concepts in Monetary Theory include the money supply, which refers to the total amount of money available, and the velocity of money, which measures how quickly money circulates. Economists use these concepts to understand and predict economic trends, guiding policymakers in making decisions that impact growth and inflation.