ECONOMICS
INFLATION
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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increasing taxes and spending and running a budget deficit
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increasing taxes and decreasing G spending and running a budget surplus
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selling government securities to decrease money supply and increase interest rates
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using education and subsidies to reduce the demand for demerit goods and providing more merit goods
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Detailed explanation-1: -While monetary policy has the tools to subdue inflation, fiscal policy can put the economy on a sounder long-term footing through investment in infrastructure, health care, and education; fair distribution of incomes and opportunities through an equitable tax and transfer system; and provision of basic public services.
Detailed explanation-2: -For example, a central bank might increase interest rates to counter demand-pull inflation, leading consumers to spend less on housing and products. This in turn lowers demand, allowing producers to catch up with supply and restoring balance. Governments can also reduce government spending or raise taxes.
Detailed explanation-3: -Fiscal policy refers to the use of government spending and tax policies to influence economic conditions, especially macroeconomic conditions. These include aggregate demand for goods and services, employment, inflation, and economic growth.
Detailed explanation-4: -The Federal Reserve and Monetary Policy.