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 

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