Economic Awareness - Sectors of Indian Economy
Which of the following fiscal policy actions helps in controlling inflation?
Which of the following fiscal policy actions helps in controlling inflation?
easy Q2 of 15
Step-by-Step Solution
Step 1: Understand fiscal policy to control inflation
Fiscal policy controls inflation by reducing aggregate demand through taxation and government spending adjustments.Step 2: Analyze tax impact
Increasing indirect taxes raises prices, reducing consumption and demand, thereby controlling inflation.Final Answer:
Increase in indirect taxes → Option BQuick Check:
Fiscal inflation control = Increase in indirect taxes ✅
Quick Trick: Higher taxes reduce disposable income and demand
Common Mistakes:
- Assuming subsidies or increased expenditure control inflation; they increase demand
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