Which describes Tight Money policy?

Which describes Tight Money policy?

• A. A policy that increases money supply.
• B. A policy that restricts credit and raises interest rates.
• C. An approach to stabilize unemployment.
• D. A policy of lowering taxes.

Answer: (B)

Tight money policy, or contractionary monetary policy, aims to slow the economy by limiting the money available for borrowing. By reducing the money supply and raising the cost of borrowing, it makes credit scarcer and increases interest rates. This slows spending and investment, helping to cool inflation, though it can slow growth and raise unemployment in the short term. This description fits a policy that restricts credit and raises interest rates. The other options describe different ideas: increasing money supply would be expansionary, lowering taxes is fiscal policy rather than monetary, and stabilizing unemployment is a broader objective rather than a description of the policy itself.

Tight money policy, or contractionary monetary policy, aims to slow the economy by limiting the money available for borrowing. By reducing the money supply and raising the cost of borrowing, it makes credit scarcer and increases interest rates. This slows spending and investment, helping to cool inflation, though it can slow growth and raise unemployment in the short term. This description fits a policy that restricts credit and raises interest rates. The other options describe different ideas: increasing money supply would be expansionary, lowering taxes is fiscal policy rather than monetary, and stabilizing unemployment is a broader objective rather than a description of the policy itself.