Question

When economists refer to "tight" monetary policy, they mean that the Reserve Bank of India is taking actions that will:

• A. Increases the demand for money
• B. Decreases the demand for money
• C. Expand the supply of money
• D. Contract the supply of money

Hint:

A tight monetary policy is typically used to prevent an overheating economy and control inflation.

Answer 1

The Correct Option is D

A "tight" monetary policy means reducing the money supply, which raises interest rates and reduces the demand for borrowing, thus helping to control inflation.