Question : Dear money policy of the central bank, which is used to keep growth steady and in line with other economic factors, refers to
Option 1: Tightening the money supply in the economy
Option 2: Easing the money supply in the economy.
Option 3: Allow commercial banks to work in a less strict environment
Option 4: Both (b) and (c)
Correct Answer: Tightening the money supply in the economy
Solution : The correct answer is (a) Tightening the money supply in the economy.
A dear money policy is a monetary policy that is used to reduce the amount of money in circulation in an economy. This is done by raising interest rates, which makes it more expensive for people and businesses to borrow money. This, in turn, reduces the amount of spending in the economy, which can help to control inflation.
So, the dear money policy is the opposite of the cheap money policy, which is used to increase the amount of money in circulation in an economy. The cheap money policy is used to stimulate economic growth, while the dear money policy is used to control inflation.
