ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Governments can reduce private spending by increasing taxes. This is one of the fiscal policies of the Governments to control inflation. Q. How does the Reserve Bank of India control inflation?

Detailed explanation-2: -The right solution to cost-push inflation is by reducing production costs. A supply-side policy is a correct solution, but generally, it will take a long time to affect. The government can provide wage subsidies. In this case, the government helps businesses by paying a portion of labor costs.

Detailed explanation-3: -Deregulation of energy, housing and other markets would reduce the regulatory burden on businesses, lowering the cost of domestic production and bringing down prices.

Detailed explanation-4: -Explanation: Government spending is cut back, which lowers the amount of money in the economy, which lowers inflation even more. It’s the rate at that the central bank lends money to commercial banks when they don’t have enough money or assets.