Question

Explain Fiscal Measures to control inflation?

Answer 1

Fiscal Measures : This is now accepted as an essential instrument to control inflation. Fiscal measures taken by the government are
(a) Government expenditure.: The government has to reduce its own expenditure in order to control inflation.
(b) Taxation : The government has to impose taxes to take away the excess purchasing power from the public.
(c) Public borrowing : When the government borrows money from the market then the private savings of households and business houses is absorbed by government bonds.
(d) Debt management : In order to reduce supply of money and prevent further credit expansion, the existing public debt should be managed in a strict manner.
(e) Over-valuation : This not only discourages exports but also results in an increase in the availability of goods and services in the domestic market.