Two important indicators of monetary tightness or ease are the

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The level of short-term interest rates reflects the cost of borrowing money in the economy, while the rate of growth of the money supply indicates how much new money is being added to the economy. A high level of short-term interest rates and a slow rate of growth of the money supply indicate monetary tightness, while a low level of short-term interest rates and a fast rate of growth of the money supply suggest monetary ease. Therefore, the level of short-term interest rates and the rate of growth of the money supply are the two key indicators of monetary policy.

Two Important Indicators of Monetary Tightness or Ease Are the