Dear money refers to money that is hard to obtain due to:
- AOption (a)
high rate of interest
- BOption (b)
low rate of interest
- COption (c)
inflation
- DOption (d)
depression
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Correct answer
high rate of interest
Why this answer is correct
The correct answer is high rate of interest.
Key Points
- Dear money policy refers to a monetary policy by the central bank.
- The central bank sets high-interest rates so that credit is not easily available to the general public in order to decrease the rate of inflation in the economy by curbing demand.
- Dear money refers to money that is hard to obtain (e.g. by borrowing) because of abnormally high-interest rates.
- This is because people prefer to save when interest rates are high and spend or borrow when rates are low.
Additional Information
- A dear money policy would cause RBI to release less amount of money to the public which can only happen if the borrowing rates are increased for the public.
- The 4 different types of money as classified by the economists are commercial money, fiduciary money, fiat money, and commodity money.
- Money whose value comes from a commodity of which it is made is known as commodity money.










