cheap money


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Related to cheap money: fiat money, Dear money

Cheap Money

A monetary policy in which a central bank sets low interest rates so that credit is easily attainable. This makes borrowing easy for business, which stimulates investment and expansion of operations. The immediate result of cheap money is a boost in stock prices; in the medium term, cheap money promotes economic growth. However, if cheap money remains in the economy for too long, it can lead to a situation in which there is a glut of currency or too many dollars chasing too few goods and services leading to inflation. For this reason, most central banks alternate between policies of cheap money and tight money in varying degrees to encourage growth while keeping inflation under control.

cheap money

cheap money

a government policy whereby the CENTRAL BANK is authorized to purchase government BONDS on the open market to facilitate an increase in the MONEY SUPPLY (see MONETARY POLICY).

The increase in money supply serves to reduce INTEREST RATES, which encourages INVESTMENT because previously unprofitable investments now become profitable as a result of the reduced cost of borrowing (see MARGINAL EFFICIENCY OF CAPITAL/INVESTMENT).

Cheap money policy, through MONEY SUPPLY/SPENDING LINKAGES, increases AGGREGATE DEMAND. Compare TIGHT MONEY. See LIQUIDITY TRAP.

References in periodicals archive ?
Now we have a lot of capital running away from the stock market, we have cheap money, and a $1 billion ad campaign that brought in people from outside New York.
But elsewhere, a more general attitude has been: Why not sell that extra option, get cheap money for a few years, and worry about the resetting exposure later on?
The bubble created a capital investment boom fueled by cheap money.
company, Creative Investment Research, tracks black financial institutions, says cheap money propels the surge.
An analyst said, 'This makes sense for Indian borrowers to tap the overseas market as they can borrow cheap money.
The world has been used to cheap money policy for long and weaning economies from cheap money is going to be difficult.
European Central Bank President Mario Draghi said on Thursday the bank had not taken a decision on whether to grant Greece access to cheap money.
Mr Ahern also blamed the availability of cheap money from Europe, adding: "That problem came from the availability, which we had never had since the foundation of the State, of cheap money through the European system.
Following its two-day meeting, the Fed's open market committee, which decides the rates, came out dovish, citing weaker-than-expected data that could warrant an extended period of cheap money policies to support the American economy.
The BoJ policies may have 'over- pushed' the economy through adding too much cheap money, Quantitative Easing (QE), after the global financial crisis had eased.
In the case of financial markets the drug has been plentiful cheap money created by Quantitative Easing.