ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Tight, or contractionary monetary policy is a course of action undertaken by a central bank such as the Federal Reserve to slow down overheated economic growth, to constrict spending in an economy that is seen to be accelerating too quickly, or to curb inflation when it is rising too fast.

Detailed explanation-2: -Tight monetary policy refers to the actions that a central bank takes to limit inflation and an overheating economy. Tight monetary policy is commonly called contractionary monetary policy.

Detailed explanation-3: -Tight monetary policy aims to slow down an overheated economy by increasing interest rates. Conversely, loose monetary policy aims to stimulate an economy by lowering interest rates.

Detailed explanation-4: -Contractionary monetary policy is when a central bank uses its monetary policy tools to fight inflation. It’s how the bank slows economic growth. Inflation is a sign of an overheated economy. It’s also called a restrictive monetary policy because it restricts liquidity.

Detailed explanation-5: -"Easy” or expansionary monetary policy occurs when the Fed tries to increase money supply by expanding excess reserves in order to stimulate the economy. 3.