--%>
Assignment Help - homework help

Fiscal and monetary policies in curtailing inflation

Explain the impact of changes in fiscal and monetary policies in curtailing inflation?

E

Expert

Verified

Changes in fiscal and monetary policies in curtailing inflation:

It is highly believed that the changes in monetary as well as fiscal policies can help in curtailing inflation. The suggested monetary policy in order to fix the inflationary issues is Contractionary Monetary Policy. To rectify the extremes of business-cycle extension and handle inflation, an economy could bring down the supply of money and perk up the interest rates. This is attained through trading treasury securities in the open marketplace, increasing the discount rate and incrementing reserve needs. Further, Keynesians asserts that a fall in the supply of money would increment interest rates, bring down spending, bring down Aggregate Demand and lastly, reduce prices and real output. This is eventually help to curtail inflation.

Moving ahead, the suggested fiscal policy to rectify the inflationary issues is contractionary fiscal policy. Contractionary fiscal policy takes in any amalgamation of a decline in government spending, a fall in transfer payments or an increment in taxes. The fiscal policy is proposed to hold back the economy by bringing down aggregate spending and aggregate demand and reduce the level of inflation. According to Keynes, an alteration in government expenditure is the more efficient fiscal policy component, since any modification in government expenditure has a straight impact on AD (aggregate demand).

   Related Questions in Macroeconomics

  • Q : Market experiencing a rise in demand

    When equilibrium moves from point a to point b in the figure shown below, the only market experiencing a rise in demand is illustrated in: (1) Panel A. (2) Panel B. (3) Panel C. (4) Panel D.

    Q : Why value of multiplier is low In poor

    In poor countries people spend a big percentage of their income so that APC and MPC are high. Yet, the value of multiplier is low. Explain why?

    		•
  • Q : Principles of macroeconomics Explain

    Explain the concept of “economies of scale” and “increasing returns”.

    		•
  • Q : POSSIBILITIES Possibilities Food

    Possibilities Food (millions of tons per year) Tractors (millions per year) A 0 30 B 4 28 C 8 24 D 12 20 E 16 14 F 20 8 G 24 0 a. Is it possible for this nation to produce thirty million tons of food per year? Why or why not. b. Is it possible for this nation to produce thirty million

    		•
  • Q : Implications of fiscal deficit

    Implications of fiscal deficit: (A) High fiscal deficit entails a big amount of borrowings in which the government takes more loans to pay back it. It raises the liability of government.

    Q : Computing Fiscal deficit In government

    In government budget, primary deficit is Rs. 10,000 crores and interest payment is Rs. 8,000 crores. Compute the fiscal deficit?

    		•
  • Q : Macroec Examples of command economies

    Examples of command economies are: a) the United States and Japan b) Sweden and Norway c) Mexico and Brazil d) Cuba and North Korea

    		•
  • Q : Tariffs Tariffs: -are also called

    Tariffs: -are also called import quotas. -may be imposed either to raise revenue (revenue tariffs) or to shield domestic producers from foreign competition (protective tariffs). -are per unit subsidies designed to promote exports. -are excise taxes on goods exported abroad.

    		•
  • Q : Calculating Trade balance Suppose the

    Suppose the value of exports of goods of a country is Rs. 1,000 crores and the value of imports of goods is Rs. 1,200 crores, what will be the trade balance (or balance of trade)?

    		•
  • Q : When people purchase goods People will

    People will purchase goods when their demand prices equivalent or surpass: (i) Transaction costs. (ii) Subjective prices. (iii) Price indexes. (iv) Market prices. (v) Wholesale prices. Please someone suggest me the right answer.

    		•