Question

What can a government do to control inflation?

• A. Increase tax rates
• B. Outside the government's authority
• C. Decrease tax rates
• D. Not change tax rates

Answer 1

The correct option is A Increase tax rates

Inflation is the rise in prices. It makes everything expensive and unaffordable for the poor. As a solution to this situation, the government increases taxes. This reduces the purchasing power of the people. When people buy less, there is less demand for goods and therefore, the prices fall.