How to stabilize the rising inflation on the economy?
Answers
Governments can use wage and price controls to fight inflation, but that can cause recession and job losses. Governments can also employ a contractionary monetary policy to fight inflation by reducing the money supply within an economy via decreased bond prices and increased interest rates.
Answer:
Inflation is generally controlled by the Central Bank and/or the government. The main policy used is monetary policy .
there are a variety of tools to control inflation :
1.Monetary policy – Higher interest rates reduce demand in the economy, leading to lower economic growth and lower inflation.
2. Control of money supply – Monetarists argue there is a close link between the money supply and inflation, therefore controlling money supply can control inflation.
3. Supply-side policies – policies to increase the competitiveness and efficiency of the economy, putting downward pressure on long-term costs.
4.Fiscal policy – a higher rate of income tax could reduce spending, demand and inflationary pressures.
5.Wage controls – trying to control wages could, in theory, help to reduce inflationary pressures.