Which of the following is a consequence of a tight monetary policy?

A tight monetary policy typically involves increasing interest rates or reducing the money supply to curb inflation. When interest rates rise, the cost of borrowing increases, leading to reduced consumer and business spending. This slowdown in demand helps to bring down inflation rates as consumers and businesses become more cautious about their spending.

Lower inflation is a direct outcome of this policy because it aims to prevent the economy from overheating and ensure price stability. By increasing the cost of loans, consumers are less likely to take out credit for big purchases, and businesses may hold off on investing due to the higher costs associated with financing.

While tighter monetary policy can lead to higher unemployment in the short term due to reduced spending and investment, the primary objective is to control inflation, making lower inflation the most direct and significant consequence of such a policy. The other outcomes, such as increased unemployment or decreased consumer spending, can be implications of lower inflation, but lower inflation is the most clear-cut goal of implementing a tight monetary policy.