Which monetary policy can be used to reduce demand- pull inflation?
A) increase in taxes on income
B) increase in government expenditure
C) decrease in the quantity of money
D) decrease in taxes on income

Question

Quizplus · Accepted Answer

Decreasing the quantity of money in circulation will result in a decrease in the amount of spending, which will help to reduce demand-pull inflation. A decrease in government expenditure or an increase in taxes can also potentially decrease inflation, but these actions can have negative impacts on economic growth and employment. Decreasing taxes on income would likely have the opposite effect and increase demand-pull inflation.

Which Monetary Policy Can Be Used to Reduce Demand- Pull