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What is one non-monetary measure the government can take to address inflation?
- a)Decrease taxes
- b)Increase interest rates
- c)Implement price controls
- d)Raise the bank rate
Correct answer is option 'C'. Can you explain this answer?
Most Upvoted Answer
What is one non-monetary measure the government can take to address in...
Implementing price controls is a non-monetary measure aimed at capping the prices of essential goods and services to prevent further inflation, especially in scenarios of hyperinflation.
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What is one non-monetary measure the government can take to address in...
Understanding Price Controls as a Non-Monetary Measure Against Inflation
Inflation can erode purchasing power and create economic uncertainty. One effective non-monetary measure that governments can employ is the implementation of price controls.
What Are Price Controls?
- Price controls are government-mandated legal maximum or minimum prices set for specific goods and services.
- These controls aim to stabilize prices during periods of inflation or economic crisis.
How Price Controls Work
- Price Ceilings: This is a maximum price set below the market equilibrium. It helps keep essential goods affordable (e.g., food, fuel) during inflationary periods.
- Price Floors: This is a minimum price set above the market equilibrium, often used in agricultural products to ensure farmers receive a fair price.
Benefits of Price Controls
- Protection for Consumers: By controlling prices, governments can protect consumers from rapid price increases, ensuring that basic necessities remain accessible.
- Market Stability: Price controls can help stabilize the economy by preventing sudden spikes in prices, which can lead to panic buying and hoarding.
- Social Equity: They can promote fairness in the distribution of resources, especially during crises, by preventing price gouging.
Challenges of Price Controls
- Supply Shortages: If prices are set too low, suppliers may reduce production, leading to shortages.
- Black Markets: Price controls can lead to the emergence of illegal markets where goods are sold at higher prices.
- Quality Reduction: Producers may cut costs by reducing the quality of goods to maintain profitability under price controls.
In conclusion, while price controls can be a useful non-monetary measure to combat inflation, they must be implemented carefully to avoid unintended negative consequences.
Inflation can erode purchasing power and create economic uncertainty. One effective non-monetary measure that governments can employ is the implementation of price controls.
What Are Price Controls?
- Price controls are government-mandated legal maximum or minimum prices set for specific goods and services.
- These controls aim to stabilize prices during periods of inflation or economic crisis.
How Price Controls Work
- Price Ceilings: This is a maximum price set below the market equilibrium. It helps keep essential goods affordable (e.g., food, fuel) during inflationary periods.
- Price Floors: This is a minimum price set above the market equilibrium, often used in agricultural products to ensure farmers receive a fair price.
Benefits of Price Controls
- Protection for Consumers: By controlling prices, governments can protect consumers from rapid price increases, ensuring that basic necessities remain accessible.
- Market Stability: Price controls can help stabilize the economy by preventing sudden spikes in prices, which can lead to panic buying and hoarding.
- Social Equity: They can promote fairness in the distribution of resources, especially during crises, by preventing price gouging.
Challenges of Price Controls
- Supply Shortages: If prices are set too low, suppliers may reduce production, leading to shortages.
- Black Markets: Price controls can lead to the emergence of illegal markets where goods are sold at higher prices.
- Quality Reduction: Producers may cut costs by reducing the quality of goods to maintain profitability under price controls.
In conclusion, while price controls can be a useful non-monetary measure to combat inflation, they must be implemented carefully to avoid unintended negative consequences.
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What is one non-monetary measure the government can take to address inflation?a)Decrease taxesb)Increase interest ratesc)Implement price controlsd)Raise the bank rateCorrect answer is option 'C'. Can you explain this answer? for Class 10 2025 is part of Class 10 preparation. The Question and answers have been prepared according to the Class 10 exam syllabus. Information about What is one non-monetary measure the government can take to address inflation?a)Decrease taxesb)Increase interest ratesc)Implement price controlsd)Raise the bank rateCorrect answer is option 'C'. Can you explain this answer? covers all topics & solutions for Class 10 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for What is one non-monetary measure the government can take to address inflation?a)Decrease taxesb)Increase interest ratesc)Implement price controlsd)Raise the bank rateCorrect answer is option 'C'. Can you explain this answer?.
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