Download the BYJU'S Exam Prep App for free IAS preparation videos & tests - Download the BYJU'S Exam Prep App for free IAS preparation videos & tests -

What is the difference between an easy money policy and a tight money policy?

In easy money policy, the interest rates are lower, therefore it is easier to borrow, thereby increasing money circulation in the economy. In the tight money policy, the interest rates are higher, therefore it is difficult to borrow and the money circulation will reduce in the economy. You can read about the Monetary Policy – Objectives, Role, Instruments  in the given link.

Easy money policy is used when there is recession, tight money policy is used when there is inflation. In tight money policy the reserve requirements of banks are increased and Government securities are sold.

Further readings:

  1. Monetary Policy Committee (MPC) – Structure, Objectives UPSC Notes
  2. Monetary System – Types of Monetary System 

Related Links

Indian Economy Notes for UPSC Civil Service Exam

The Reserve Bank of India: Functions and Composition

Cash Reserve Ratio (CRR) – Importance, Advantages & Effects

Statutory Liquidity Ratio (SLR) – Definition, Objective & Impact

Open Market Operations (OMO) – Types

Previous Years Economics Mains Questions 

Comments

Leave a Comment

Your Mobile number and Email id will not be published.

*

*