\u00a0Fiscal Policy is now recognised as an important instrument to tackle an inflationary situation in the economy. The major anti-inflationary fiscal measures are the following:<\/span><\/p>\n During inflation, as is well known, aggregate effective demand increases for too much due to unregulated private expenditure. The increased private expenditure presses heavily against the limited supply of goods and services available in the<\/span>\u00a0increased private spending, the government should, at such a time, reduce its own expenditure to the minimum extent possible to help limit the aggregate demand. <\/span><\/p>\n Taxation acquires added significance as an anti-inflationary weapon during an inflationary boom. The problem during inflation is to reduce the size of disposable income in the hands of the general public in view of the limited supply of goods and services in the market.<\/span><\/p>\n This is another anti-inflation weapon which is often utilised to contain inflationary pressures in the economy. The object of public borrowings is to take away from the public excess purchasing power which, if left free, would surely exert an upward pressures on the price level in view of the limited supplies of goods and services in the economy. Public borrowing may be voluntary or compulsory. Ordinarily, public borrowing is voluntary, left to the free will of individuals. <\/span><\/p>\n But voluntary borrowing has one disadvantage and that is it does not bring to the government sufficient amount to have a really effective impact on the inflationary pressures, It thus becomes essential in due course of time to resort to compulsory saving or compulsory borrowing from the public (also known as deferred pay). \u00b7 <\/span><\/p>\n According to this plan, a certain percentage of the wages or salaries of employees is compulsorily deducted in exchange for saving bonds which become redeemable after a few years. This has the effect of blocking purchasing power for a definite period so as to relieve pressure on the limited supplies of goods and services. It has also the added advantage of releasing blocked purchasing power as the first symptom of a recession in business activity. <\/span><\/p>\n Compulsory saving was resorted to in Great Britain during the Second World War at the instance of Lord Keynes to fight inflation. The scheme of compulsory saving was also introduced in India for the employees and income tax assesses in 1974 as a fiscal measure to hold the inflationary forces in check.<\/span><\/p>\n The existing public debt should be managed in such a manner as to reduce the existing money supply and prevent further credit expansion. Anti-inflation debt management usually requires the retirement or payment of bank-held debt out of a budget surplus. The idea is that the government securities held by commercial banks should be retired by the government out of a budgetary surplus. This would check the power of commercial banks to en cash their securities and add to their reserves for the purpose of credit expansion. There is, however, one snag here. At a time of inflation, despite its best efforts, the government may not succeed in having a budgetary surplus. <\/span><\/p>\n Due to the excessive increase in expenditure, the government may actually be faced with a deficit budget. In that case, the government can adopt another method to retire bank-held debt. It can retire this debt by the sale of bank-ineligible bonds to non-bank investors, <\/span>like insurance companies, saving banks, individuals, etc. This will have the effect of taking away spendable money from the public, and thus, contribute to a lessening of pressure on limited stocks of goods and services available in the market.<\/span><\/p>\n But this method is also subject to limitations. It would be rendered ineffective if the non-bank investors were unwilling to give up their spendable money in exchange for government bonds. It would also prove futile if the non-bank investors utilised for purchasing government bonds idle funds which would not have been spent at all.<\/span><\/p>\n Here are the notes for Fiscal Policy And Economic Growth<\/a><\/p>\n","protected":false},"excerpt":{"rendered":" Fiscal Policy During Inflation \u00a0Fiscal Policy is now recognised as an important instrument to tackle an inflationary situation in the economy. The major anti-inflationary fiscal measures are the following: 1) Government Expenditure : During inflation, as is well known, aggregate effective demand increases for too much due to unregulated private expenditure. The increased private expenditure … Read more<\/a><\/p>\n","protected":false},"author":12,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"spay_email":""},"categories":[8],"tags":[],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/mcqbooks.com\/wp-json\/wp\/v2\/posts\/32649"}],"collection":[{"href":"https:\/\/mcqbooks.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mcqbooks.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mcqbooks.com\/wp-json\/wp\/v2\/users\/12"}],"replies":[{"embeddable":true,"href":"https:\/\/mcqbooks.com\/wp-json\/wp\/v2\/comments?post=32649"}],"version-history":[{"count":0,"href":"https:\/\/mcqbooks.com\/wp-json\/wp\/v2\/posts\/32649\/revisions"}],"wp:attachment":[{"href":"https:\/\/mcqbooks.com\/wp-json\/wp\/v2\/media?parent=32649"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mcqbooks.com\/wp-json\/wp\/v2\/categories?post=32649"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mcqbooks.com\/wp-json\/wp\/v2\/tags?post=32649"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}1) Government Expenditure :<\/h3>\n
2) Taxation:<\/h3>\n
3) Public borrowings:<\/h3>\n
4) Debt management:<\/h3>\n