what is Controlling Inflation

Posted on 01-05-2016        By leena

what is Controlling Inflation:-

There are broadly two ways of controlling inflation in an economy – Monetary measures
and fiscal measures. The most important and commonly used method to control inflation
is monetary policy of the Central Bank. Most central banks use high interest rates as the
traditional way to fight or prevent inflation. Monetary measures used to control inflation
include (i) bank rate policy (ii) cash reserve ratio and (iii) open market operations. Besides
these monetary policy steps, the fiscal measures to control inflation include taxation,
government expenditure and public borrowings. The government can also take some
protectionist measures (such as banning the export of essential items such as pulses,
cereals and oils to support the domestic consumption, encourage imports by lowering duties on import items etc.)

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