Measures to Curb Inflation Homework Help

Measures to Curb Inflation

a) Contractionary Monetary Policy

Increase bank rate (interest rate)

Sell government securities in the open market (means borrowing money)

Increase cash reserve ratio (so more money with central bank to inject money into the economy)

Increase special deposit

b) Contractionary Fiscal Policy

Reducing government expenditure

Increasing personal income tax

Increasing company tax

c) Incomes Policy

Price and wage control by setting

i. Some form of norm for wage settlement. (wage floor/ceiling)

ii. Fine or tax on firms breaking the price or wage limits.

d) Indexation

This involves the adjustment of wage rates and interest rates according to the level of inflation rate. (so that real wages  can catch-up with the inflation rate)

e) Compulsory Savings

The amount of spending by the public can be reduced by raising the Central Provident Fund (CPF) contribution. (so people will save more than they spend)

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