The policies that a country should adopt to close/eliminate an inflationary gap
Decrease aggregate demand or increase supply through
- Reducing government expenditure for example cutting down wages and salaries paid to workers
- Encouraging investors as a way of increasing the production of goods and services
- Increasing direct taxes so as to reduce on the disposable incomes of the people
- Using restrictive monetary policies aimed at reducing money supply and aggregate For example selling government securities to the public and increasing the bank rate.
- Increase interest rates on loans to discourage borrowing
- Discourage the exportation of goods and services which are scarce in the economy
- Encourage importation of goods and services which are scarce in the economy.
- Maximum wage policy aimed at decreasing the wages and salaries of employees so as to decrease aggregate demand in the economy.
- Increase interest rate to discourage borrowing and reduce money supply
- Price control
CATEGORIES Economics
TAGS Dr. Bbosa Science