Asked by Natcha Channara on Jun 03, 2024
Verified
The purpose of a tight money policy is to
A) alleviate recessions.
B) raise interest rates and restrict the availability of bank credit.
C) run budget surpluses.
D) increase investment spending.
Tight Money Policy
A monetary policy that makes borrowing money more expensive and less accessible in order to reduce inflation.
Interest Rates
The proportion of interest a borrower is charged for loaned funds.
Bank Credit
The total amount of borrowing capacity available to an individual or entity from a bank or other financial institutions, enabling the borrower to make purchases or investments.
- Perceive the contribution of monetary policy to economic condition modulation.
Verified Answer
AP
Andrea PantaJun 08, 2024
Final Answer :
B
Explanation :
A tight money policy is implemented by the government to control inflation and curb economic growth. It involves raising interest rates and restricting the availability of bank credit, which makes it more difficult for people and businesses to borrow money. This can lead to a decrease in consumer spending and business investment, which helps to slow down the economy. It is not aimed at alleviating recessions or increasing investment spending, nor does it necessarily result in budget surpluses.
Learning Objectives
- Perceive the contribution of monetary policy to economic condition modulation.