A tight money policy means __________. the Federal Reserve wants to increase the amount of money in the economy the Federal Rese
rve wants to decrease the amount of money in the economy borrowing money is inexpensive and easy to obtain businesses expand and increase the number of employees
A tight money policy means "the Federal Reserve wants to decrease the <span>amount of money" in the economy, which is usually done by restricting credit and raising interest rates. </span>
The correct answer is: "the Federal Reserve wants to decrease the amount of money in the economy"
A tight monetary policy takes place when the money supply is limited by the Fed, which is the US Central bank. This means that the amount of money in circulation in the economy becomes smaller. Threfore, there is a relative scarcity that leads to the increase of the price of money, the interest rate, and this affects the amount charged for a loan.
High interest rates discourage firms from undertaking investment projects with borrowed money, as their rentability needs to be very high to compensate for the large amounts to be paid for the funds. Therefore, business growth is stifled due to the increase in the price of money.
