Curb demand to drive inflation should beA.control of the money supplyB.reduce the wageC.abatement of taxD.Investment increases
Question
Curb demand to drive inflation should be
A. control of the money supply
B. reduce the wage
C. abatement of tax
D. Investment increases
Solution
The correct answer is:
A. Control of the money supply
Explanation:
Inflation is often caused by an increase in the supply of money relative to the demand for goods and services. By controlling the money supply, a central bank can curb demand and thus help to control inflation. This can be done through various monetary policy tools, such as raising interest rates, increasing reserve requirements for banks, or selling government bonds to reduce the amount of money in circulation.
The other options (B, C, D) are not typically used to curb demand and control inflation:
B. Reducing the wage could potentially reduce demand by lowering people's income, but it could also lead to other problems like lower productivity and worker unrest.
C. Abatement of tax could actually increase demand by leaving people with more disposable income to spend.
D. Investment increases could also increase demand by stimulating economic activity.
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