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Tight Monetary Policy

Tight Monetary Policy Definition

Describes an action taken by the Federal Reserve to control inflation that is rising too quickly or to constrict spending when it appears the economy is growing too fast.  If the government is worried that inflation is rising too fast they will "make money tight" by raising the short-term interest rates (otherwise known as the Fed funds or discount rate), which in affect makes loans more expensive and thus helps to slow the growth of inflation.







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