Multiple choice

Which of the following fiscal policies does not help in containing inflation?

  1. Increase in tax rates

  2. Borrowing debt from public

  3. Decrease in transfer payments

  4. Increase in non-developmental expenses
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

It does not help in containing inflation. The non-developmental expenses such as on luxury of ministers, frequent foreign visits of ministers etc, do not produce anything, but increase the money supply without any increase in the productivity of goods and services. Hence, the prices will rise, as people have more purchasing power.

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