Tight monetary policy theory dictates that when the economy is faced with inflation, the government should

Question

Quizplus · Accepted Answer

Tight monetary policy theory suggests that when there is inflation, the government should decrease the supply of credit to reduce spending and slow down the economy. This can be done through measures such as raising interest rates, selling government securities, or increasing reserve requirements for banks. Increasing the supply of credit or decreasing taxes would have the opposite effect and likely exacerbate inflation. Taking complete control of the economy is not a solution supported by tight monetary policy theory.

Tight Monetary Policy Theory Dictates That When the Economy Is