ECONOMIC POLICIES TO CONTROL INFLATION

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  • Created by: Lottie
  • Created on: 19-05-12 16:27

 MONETARY POLICY-INTEREST RATES

  • increase in interest rates & a contraction in the real money supply
  • discourage borrowing by households & companies
  • increase the rate of saving
  • will reduce disposable Y
  • business investment may also fall , as the cost of borrowing funds will increase

FISCAL POLICY

  • higher direct taxes= less disposable Y
  • lower gov spending to reduce AD
  • a reduction in the amount the gov sector bprrpws each year
  • increase the rate of leakeages from the leakages in the…

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