Question

Arrange the following in the correct sequential order, if the government of a nation is trying to curtail the situation of inflationary gap:

1. Decrease in disposable income
2. Increase in taxes
3. Decrease in Aggregate Demand 

Options

• (i), (ii), (iii) 

• (iii), (ii), (i) 

• (ii), (iii), (i) 

• (ii), (i), (iii) 

Answer 1

(ii), (i), (iii)

Explanation:

When the government raises taxes to reduce inflation, people's disposable incomes decline. Lower disposable income leads to decreased consumption and aggregate demand, reducing the inflationary gap in the economy.