Question

Q. Which of the following fiscal or monetary measures is/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 incentivise savings- Increases savings in the economy.
• Invoking essential commodities act -In an inflationary environment arising out of hoarding or cartelization Govt can invoke ECA and buffer stocking to ease the supply.