A fiscal policy cure for inflation might include
A)A reduction in government spending.
B)An increase in the reserve requirement.
C)Reductions in marginal tax rates for corporations and households.
D)Infrastructure development.

Question

Quizplus · Accepted Answer

A reduction in government spending can decrease the overall demand in the economy, which can decrease the pressure on prices and inflation. This can also decrease the amount of money in circulation, which can reduce inflationary pressure. Option B may be more effective in a situation where inflation is caused by excessive bank lending, rather than overall demand. Option C may not have an immediate impact on demand and inflation, and option D may increase government spending, causing inflationary pressure.

A Fiscal Policy Cure for Inflation Might Include