ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Governments may pursue a contractionary monetary policy, reducing the money supply within an economy. The U.S. Federal Reserve implements contractionary monetary policy through higher interest rates and open market operations.

Detailed explanation-2: -Among different possible solutions to the crisis, probably the most commonly adopted are related to public spending, control of private institutions, taxation, public employment and private employment. As explained above, the causes of the crisis were related to the governments vs.

Detailed explanation-3: -Fiscal Policy To reduce inflation, the government can increase taxes (such as income tax and VAT) and cut spending. This improves the government’s budget situation and helps to reduce demand in the economy. Both these policies reduce inflation by reducing the growth of aggregate demand.

Detailed explanation-4: -Deflation can be controlled by using various monetary policy measures. Quantitative easing, cutting tax rates, lowering interest rates, open market operations, lowering bank reserve limits, increasing spending by the Government are the ways in which deflation can be controlled.