What are the monetary and fiscal ways of dealing with inflation?
Answer:
Monetary: Print less money, increase the bank lending rate (interest rates), issue more bonds (gov't borrows money pulling it out of circulation)
Fiscal: raise taxes while keeping Gov't spending the same or reduced (this will decrease economic growth, reduce Gov't spending, Increase tariffs on imports (this will raise domestic prices as well), Gov't incentives to mine/drill metals/oil (this will increase supply and lower prices, e.g. if Anwar was open to drilling)
monetary ways of dealing with inflation is for the central bank to raise interest rates. this results in credit / loans being more expensive, therefore returns need to be higher (in absolute terms) for investments, so people & companies borrow less (or more cautiously).
the fiscal way is to reduce money supply either through increased taxes or reduced government spending. in either event there is less money available in the economy to spend, which reduces demand, resulting in lower pressure on prices to increase: lower inflation.
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