--%>
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 : 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 : Why is tax not a capital receipt

    Illustrate, why is tax not a capital receipt?

    		•
  • Q : Tax when consumer pay high price When a

    When a tax on goat cheese is completely paid by consumers via higher prices, then the tax has been: (i) alleviated. (ii) Forward shifted. (iii) Backward shifted. (iv) Actualized. (v) Randomized. Can someone help me in getting throu

    		•
  • Q : Effect of flood on demand Mold which

    Mold which destroyed the hamburger crop following a flood would be most probable to slash the demands for: (1) Fried chicken with mashed potatoes and gravy. (2) Soda pop and water. (3) Cucumbers, carrots, and egg plant. (4) Mustard and ketchup. (5) Tofu and sushi.

    		•
  • Q : Monetary policy-how is it decided The

    The practice explores how monetary policy influences the economy and the type of factors which are significant in finding out the Monetary Policy Committee’s decision.

    		•
  • Q : Price ratios and marginal utility ratios

    I have a problem in economics on Price ratios and marginal utility ratios. Please help me in the following question. The efficiency in consumption needs equality of: (i) Income distribution. (ii) All product price and resources. (iii) MC and MR. (iv)

    		•
  • Q : Value of MPC Why can be value of MPC be

    Why can be value of MPC be not more than one? Answer: The value of MPC will not be more than one since increment in consumption (ΔC) can’t be more than

    		•
  • Q : Full-employment Define the "

    Define the "full-employment" or "natural" rate of unemployment and give its approximate percentage rate as economists currently define it.

    		•
  • Q : Paradox of Value problem I have a

    I have a problem in economics on Paradox of Value problem. Please help me in the following question. The Diamond Water Paradox occurs from the difficulties in differentiating between: (i) Consumer surplus and the total utility. (ii) Total utility and

    		•
  • Q : Define voluntary unemployment Voluntary

    Voluntary unemployment: It refers to a condition when person are not willing to do work at customary market wage rate, though they are receiving a work.

    		•