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Explain the the two fiscal majors …

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Explain the the two fiscal majors to correct the situation if inflation and deflation

Posted by Rohit Sharma 4 years, 2 months ago

CBSE > Class 12 > Economics

1 answers

Hansika Jain 4 years, 2 months ago

Fiscal measures refers to the steps taken by the *government* to control the fluctions(inflation and deflation) in the economy Govt could do so by:- During Inflation (Since the AD is high, people have excess of disposable income with them and the money supply is high) 1) Reduce the wasteful govt expenditure and expenditure on defence 2)Increase taxes (this will reduce the disposable income hence reducing the demand) During deflation (In this situation the demand is less then expected) 1)Increase the govt expenditure on welfare and defence 2) Reduce Taxes (this will increase the disposable income of people and miney supply in the economy, hence increasing the demand)

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