Question

It is believed that increase in public expenditure leads to Inflation. Under what circumstances may a government consider it prudent to increase public expenditure to control inflation?

Answer 1

In situations of emergency, like a natural calamity, pandemic (COVID-19), etc., the government can provide subsidies to the sellers or producers of the basic necessities to control the upward pressure on the prices of these commodities. In this situation, the government has to increase its expenditure on providing this subsidy.