Question

Answer the following question in five to six sentences:
Explain the fiscal measures to control inflation.

Answer 1

Some of the fiscal measures to control inflation are:
i. Reduction in public expenditure:

1. Government expenditure should be reduced to control inflation.

ii. Increase in taxes:

1. It involves an increase in the level of taxes and the imposition of new taxes by the Government.
2. It leads to a fall in the consumption expenditure of consumers. 
3. So, the demand for goods decreases.

iii. Surplus Budget:

1. The government has to adopt a surplus budget in order to control inflation.

iv. Public borrowings:

1. The government borrows money from the market, private individuals and firms.
2. It takes away excess purchasing power from people.
3. It reduces demand and hence prices come down.

v.  Overvaluation:

1. It discourages exports and increases the availability of goods and services in a country.