Multiple choice

Which of the following methods does not help in price stability?

  1. Increase or decrease in taxes

  2. Following the policy of progressive taxation

  3. Increase in non-developmental expenses

  4. Adopting policy of deficit financing with increase in production
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

It does not help in price stability. When there is increase in non-developmental expenditure like increase in expenses on administration, payment of old age pension, expenses on ministers' security etc, it increases the supply of money. But these expenses do not help in increasing production; as such supply is less in comparison to demand and the prices move upward.

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