Which of the following is an example of government policy that could reduce inflation ?
Correct answer: C. reducing government expenditure
- A. increasing bank lending
- B. increasing import duties
- C. reducing government expenditure
- D. None of these
Explanation
Reducing government expenditure lowers aggregate demand, helping to ease demand-pull inflation. Increasing bank lending or import duties generally puts upward pressure on demand or prices.
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The economy is studied as a whole through national income, gross domestic product, inflation, unemployment, economic growth and business cycles. Coverage includes aggregate demand and supply, consumption and investment, money and banking, fiscal and monetary policy, exchange rates and balance of payments, which distinguishes macroeconomics from the study of individual markets.
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