Here are the following effects of loose money and tight
money policies on the actions being listed.
A. A loose money policy
is usually implemented as an effort to encourage economic growth.
This can lead to inflation when uncontrolled. The effects are:
1. Borrowing becomes easy
2. Consumer buys more
3. Since more people are willing to buy,
businesses expand
4. Employment rate increases due to
expansion of businesses
5. Since more people are employed, thus
production also increases
B. A tight money policy is a course of action to restrict spending
in an economy that is growing too quickly or to hold back inflation when it is
rising too fast. This can lead to recession when uncontrolled. The
effects are:
1. Borrowing becomes difficult
2. Consumer buys less
3. Since people don’t have a lot of
money, business don’t expand
4. Unemployment rate increases due to businesses
slowing down
5. Production decreases
