Question

Which of the following is not a fiscal measure to control inflation?

• A. Increase in taxation
• B. Public Borrowings
• C. Overvaluation
• D. Increase in bank rate

Answer 1

The correct option is D Increase in bank rate

A sustained increase in the general level of prices for goods and services in a county is known as inflation. Under conditions of inflation, the prices of things rise over time. When prices rise, and alternatively when the value of money falls you have inflation. Under a certain limit, inflation is suitable and beneficial for under-developed countries because it increases production.

Fiscal policies are conducted by finance ministry to control inflation. Following are the fiscal policies to control inflation:-

• To increase public income
  
• To increase taxation
• To provide subsidy
• Deficit financing
  
• Tocut down public expenditure