Question

Q. Which of the following fiscal or monetary measures are likely to be employed by the government to tackle the rising inflation?

Select the correct answer using the code given below:

• A. 1, 2 and 3 only
• B. 1, 2 and 4 only
• C. 2, 3 and 4 only
• D. 1, 2, 3, 4 and 5

Answer 1

The correct option is D 1, 2, 3, 4 and 5

Explanation:

All the above measures can be employed to tackle Inflation.

• Credit Control will reduce the overall money supply and thus may lead to a reduction in inflation due to increased demand.
• Reduction in unnecessary expenditure by the government by cutting debt will reduce inflationary pressure.
• Increasing the Income tax rates - It will reduce the money available for consumption thus decreasing the demand.
• Tax exemptions for employees to incentivize savings - Increases savings in the economy.
• Invoking the Essential Commodities Act - In an inflationary environment arising out of hoarding or cartelization, Govt can invoke ECA and buffer stocking to ease the supply.