ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Too much easy money can cause the economy to overheat. It can incentivize over-investment in projects with poor outlooks. Easy money can lead to high inflation. Discourages saving since interest rates on deposit accounts are low.

Detailed explanation-2: -Central banks conduct monetary policy by adjusting the supply of money, usually through buying or selling securities in the open market. Open market operations affect short-term interest rates, which in turn influence longer-term rates and economic activity.

Detailed explanation-3: -Cost-push inflation occurs when the input prices for goods tend to rise, possibly because of a larger money supply, at a rate faster than consumer preferences change.

Detailed explanation-4: -Inflation Targeting Most modern central banks target the rate of inflation in a country as their primary metric for monetary policy. If prices rise faster than their target, central banks tighten monetary policy by increasing interest rates or other hawkish policies.