What actions might a government take in order to reduce the rate of inflation in the economy?
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Title: What actions might a government take in order to reduce the rate of inflation in the economy?

Essay Details:

Subject: Miscellaneous
Author: Virgina S
Date: July 27, 2016
Level: University
Grade: A
Length: 4 / 923

Essay text:

Increased mortgage costs will also reduce market demand in the housing market ? Business investment may also fall, as the cost of borrowing funds will increase. Some planned investment projects will now become unprofitable and, as a result, aggregate demand will fall. ? Higher interest rates could also be used to limit monetary inflation. A rise in real interest rates should reduce the demand for lending and therefore reduce the growth of broad money. Fiscal Policy ? Higher direct taxes (causing a fall in disposable income) ? Lower Government spending ? A reduction in the amount the government sector borrows each year (PSNCR) These fiscal policies increase the rate of leakages from the circular flow and reduce injections into the circular flow of income and will reduce demand pull inflation at the cost of slower growth and unemployment...

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