cheap money

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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 ?
2 -- color) Big paw prints were a sure sign that something unusual was on the loose.
According to article 16 of the World Health Organisation's Framework Convention on Tobacco Control (FCTC), countries should take steps to protect children from smoking, including banning the sale of small packets and loose cigarettes, he said.
Plain antero-posterior (fig:1) and lateral (fig;2) radiograph of x-ray Right knee shows multiple radio-opaque loose bodies of varying sizes present over supero-lateral aspect and intra-articular loose bodies of varying sizes.
It is for this reason that trainers generally discourage on-leash greetings between dogs (even when both are willing participants in the interaction), or at least remind owners to maintain a loose leash during greetings where both parties have given consent.
Loose threatened to smash Mr Mee's face in and Roberts punched him.
Retorque loose nuts to 320-350 lb-ft for the M88A1 and 350-400 lb-ft for the M88A2.
From left, Green teas Genmai-Cha Loose tea pouch, 50g; Houji-Cha Loose Tea Pouch, 50g, and Niban-Cha Loose tea pouch, PS50g, all PS18 from The East India Company www.
will not be the end of the aggressive campaign against loose firearms," Purisima told reporters last week.
JERSEY 3 BHOY Cheeky Rod pulled out Celtic top with Loose Man on But after that World Cup result in Cardiff last month, the same can't be said for Denise Welch.
It's a glimpse of what it must be like to be a guest on Loose Women - a case of every man, or woman, for themselves, amidst all the hoopla.