ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The tight monetary policy refers to the action taken by the central bank to bring down inflation by reducing the money demand and supply in the economy.

Detailed explanation-2: -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-3: -Definition. 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-4: -The most simple example of tight monetary policy would involve increasing interest rates. Alternatively in theory, the Central Bank could try and reduce the money supply. For example, printing less money, or sell long dated government bonds to banking sector. This is very roughly the opposite of quantitative easing.

Detailed explanation-5: -A contractionary policy attempts to slow the economy by reducing the money supply and fending off inflation. An expansionary policy is an effort that central banks use to stimulate an economy by boosting demand through monetary and fiscal stimulus.