Question

Which money is called Dear Money?

Answer 1

Answer: Tight Money

Explanation:

Dear money is a term used in economics to describe a situation when money becomes expensive to borrow. This happens when interest rates are high, making it costly for individuals and businesses to obtain loans or credit from banks and financial institutions.

The term "dear" here doesn't mean precious or beloved, but rather refers to something being expensive or costly. When money supply in the economy becomes limited or restricted, the cost of borrowing increases significantly. This creates a scenario where accessing funds becomes "dear" or expensive for borrowers.

Tight money policy is implemented by central banks when they want to control inflation or prevent the economy from overheating. During such periods, the central bank reduces money supply by raising interest rates, increasing reserve requirements for banks, or selling government securities in the open market.

The effects of dear money or tight money policy include:

• Higher interest rates on loans and mortgages • Reduced consumer spending due to expensive credit • Lower business investments as borrowing costs increase • Decreased money circulation in the economy • Control over inflation rates • Strengthening of the currency value

Understanding this concept is crucial for students studying economics and finance, as it helps explain how monetary policy affects everyday economic activities and decision-making processes of individuals and businesses in the market.