Fiscal measures to check inflation involve _________.
Fiscal measures to check inflation involve _________.
The correct option is D all of the above
Fiscal policies refers to the measures which are directly taken by
the government to check inflation and deflation in the economy. The measures to
check inflation are as follows:
(i) Taxation measure: By increasing the direct tax, the real
income of public would decrease as a result of which the purchasing power will
fall which will ultimately correct inflation as there will be no excess demand
in the economy and by increasing
the indirect tax on luxury goods,the demand of these goods will fall as the
real income of people would be decreased as a result of which excess demand
would be balanced in the economy and inflation will be corrected.
(ii) Expenditure measures: Government can also cut its
public expenditure on developing infrastructure, health, education etc. which
will decrease the money supply in the economy as a result of which real income
would fall and inflation would be corrected.
(iii) Public borrowing: It refers to the borrowings of government from the public by selling some bonds or treasury bills. If government increases public borrowing then it will soak the liquidity from the economy which reduces the money supply in the economy and hence inflation is corrected.
Fiscal policies refers to the measures which are directly taken by the government to check inflation and deflation in the economy. The measures to check inflation are as follows:
(i) Taxation measure: By increasing the direct tax, the real income of public would decrease as a result of which the purchasing power will fall which will ultimately correct inflation as there will be no excess demand in the economy and by increasing the indirect tax on luxury goods,the demand of these goods will fall as the real income of people would be decreased as a result of which excess demand would be balanced in the economy and inflation will be corrected.
(ii) Expenditure measures: Government can also cut its public expenditure on developing infrastructure, health, education etc. which will decrease the money supply in the economy as a result of which real income would fall and inflation would be corrected.
(iii) Public borrowing: It refers to the borrowings of government from the public by selling some bonds or treasury bills. If government increases public borrowing then it will soak the liquidity from the economy which reduces the money supply in the economy and hence inflation is corrected.
