Which of the following can be undertaken to control inflation?a)Contro...
Inflation can be controlled using monetary, fiscal and other measures.
View all questions of this test
Which of the following can be undertaken to control inflation?a)Contro...
To control inflation, several measures can be undertaken. These measures include:
1. Control on public expenditure:
- The government can reduce its own expenditure to control inflation. By cutting down unnecessary expenses and ensuring efficient utilization of resources, the government can reduce the overall demand in the economy.
- This can be done by implementing strict budgetary discipline, reducing subsidies, and avoiding unnecessary borrowing. By doing so, the government can reduce the pressure on prices and help control inflation.
2. Control on hoarding and black marketing:
- Hoarding refers to the practice of accumulating essential goods in large quantities to create an artificial shortage in the market, leading to price hikes. Black marketing refers to the illegal sale of goods at prices higher than the market rates.
- To control inflation, the government can take measures to curb hoarding and black marketing. This can be done by implementing strict laws and regulations, conducting regular inspections, and imposing heavy penalties on those involved in such activities.
- Additionally, the government can also increase the supply of essential goods through imports or by encouraging domestic production to meet the demand and stabilize prices.
3. Effective control on credit:
- Credit plays a crucial role in influencing the purchasing power of individuals and businesses. When credit is easily available, it leads to increased spending and demand, which can contribute to inflation.
- To control inflation, the central bank can adopt a tight monetary policy by increasing interest rates and tightening the availability of credit. This would discourage excessive borrowing and spending, thereby reducing demand and controlling inflation.
- Additionally, the central bank can also regulate the amount of money in circulation by adjusting reserve requirements for banks and conducting open market operations.
By implementing all these measures, the government can effectively control inflation. It is important to adopt a comprehensive approach that addresses both the demand and supply factors contributing to inflation.
To make sure you are not studying endlessly, EduRev has designed UPSC study material, with Structured Courses, Videos, & Test Series. Plus get personalized analysis, doubt solving and improvement plans to achieve a great score in UPSC.