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Central-bank actions intended to make financial conditions more restrictive, often to reduce inflation pressure.
This may involve higher policy rates or a smaller balance sheet. The effects depend on credit conditions, expectations and delays. Tightening can restrain demand without directly fixing supply disruptions.
A central bank raises its policy rate while monitoring inflation and employment.
Shift a curve and see a simplified market find a new equilibrium.
Equilibrium quantity 30
Equilibrium price 50
Higher demand intercept shifts demand outward. Higher supply intercept represents higher costs and shifts supply upward.
At equilibrium: demand price = 80 − 30 = 50; supply price = 20 + 30 = 50.
A simplified competitive market: demand P = D − Q and supply P = S + Q. Units are illustrative. Slopes are held fixed; intercept controls shift curves, while the equilibrium moves along the other curve. Real markets may not adjust immediately or follow straight lines.
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