ECONOMICS (CBSE/UGC NET)

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: -Supply-side policies can be used by the government to reduce inflation. As the efficiency of capital or the skills and knowledge of labour in the economy increases, the production capacity in the economy will increase. When this happens, inflation will be lower.

Detailed explanation-3: -Supply-side policies can help reduce inflationary pressure in the long term because of efficiency and productivity gains in the product and labour markets. They can also help create real jobs and sustainable growth through their positive effect on labour productivity and competitiveness.

Detailed explanation-4: -Inflation can be controlled by a contractionary monetary policy is one common method of managing inflation. A contractionary policy aims to reduce the supply of money within an economy by lowering the prices of bonds and rising interest rates. Thus, consumption falls, prices fall and inflation slows down.