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A situation in which it is difficult to receive credit because of the monetary policy of the central bank. Tight money occurs when the central bank has enacted relatively high target interest rates. While this usually happens when the central bank is seeking to control or is concerned about inflation, tight money can negatively impact security prices and make it hard to receive a loan for a house or business.
A condition of the money supply in which credit is restricted and interest rates, consequently, are relatively high. Tight money generally has a negative effect on security prices, at least in the short run. Compare easy money.
dear moneya government policy whereby the CENTRAL BANK is authorized to sell government BONDS on the open market to facilitate a decrease in t he MONEY SUPPLY (see MONETARY POLICY).
The decrease in money supply serves to increase INTEREST RATES, which discourages INVESTMENT because previously profitable investments become unprofitable owing to the increased cost of borrowing (see MARGINAL EFFICIENCY OF CAPITAL