GK
INDIAN ECONOMY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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high price level
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large money supply
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high production
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high interest rates
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Detailed explanation-1: -Dear money policy refers to a monetary policy by the central bank where the central bank sets high interest rates so that credit is not easily available to the general public in order to decrease the rate of inflation in the economy by curbing demand.
Detailed explanation-2: -Dear money concept allows interest rates to surge high. It makes money look expensive to individuals. Due to the tightening of the monetary policy during this phase, the general public needs help to access loans as they get expensive. However, it does benefit the economy as it helps them to fight inflation.
Detailed explanation-3: -Dear money policy is a policy when money become more expensive with the rise of interest rate. Due to this, the supply of money also decreases in the economy, therefore it is also referred to as the contractionary monetary policy.