Which of the following can be used for checking inflation temporarily?...
**Explanation:**
Inflation refers to the sustained increase in the general price level of goods and services in an economy over a period of time. It erodes the purchasing power of consumers and reduces the value of money. To control inflation, various monetary and fiscal policies can be implemented. Among the options given, the most effective measure for temporarily checking inflation is a decrease in money supply.
**Decrease in Money Supply:**
- When the central bank of a country reduces the money supply in the economy, it restricts the amount of money available for spending and borrowing.
- This reduction in money supply leads to a decrease in the aggregate demand for goods and services, which can help control inflation in the short term.
- A decrease in money supply results in less money chasing the same amount of goods and services, thereby reducing the upward pressure on prices.
- It can also lead to an increase in interest rates, which can discourage borrowing and spending, further dampening inflationary pressures.
**Increase in Wages:**
- While an increase in wages can temporarily boost consumer spending power, it can also contribute to demand-pull inflation.
- When wages rise faster than productivity, it leads to an increase in production costs for businesses.
- In response, businesses may pass on these increased costs to consumers in the form of higher prices, leading to inflation.
- Therefore, increasing wages is not an effective measure for temporarily checking inflation.
**Decrease in Taxes:**
- A decrease in taxes can potentially stimulate economic growth and increase consumer spending.
- However, it does not directly address the underlying causes of inflation.
- In fact, a decrease in taxes can lead to an increase in aggregate demand, potentially exacerbating inflationary pressures.
- Therefore, decreasing taxes is not an effective measure for temporarily checking inflation.
In conclusion, among the given options, a decrease in money supply is the most appropriate measure for temporarily checking inflation. By reducing the money available in the economy, it helps control aggregate demand and reduces upward pressure on prices.
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