The steps taken to manage inflation could be classified into followings:
- · Monetary measures
- · Fiscal measures
- · Other measures
Method of getting money:
The control over money supply is a powerful method to manage inflation. If you have inflation it may be control by reducing method of getting money utilizing the tools of monetary policy.
Issuance of loans by the banks increases money supply in the united kingdom which results in inflation. Central bank by imposing restrictions on the loans can control the method of getting money which supports to manage the inflation.
If the federal government increases interest rate on deposits/saving schemes it’ll induce people to buy such schemes. Consequently circulation of money reduces that really help to manage inflation.
To be able to control inflation the federal government can implement monetary reforms. Under this approach government can exchange old notes for new notes and massive amount notes could be
blocked. Such blocked money could be reissued following the certain time period. Such system was adopted in Poland, Norway and Denmark.
Increase in taxes:
The increase in taxation reduces the purchasing power of the people. The amount of money moves from public to the government. By this method of getting money is reduced in the economy which results in controlling prices.
By controlling the degree of exports the inflation could be controlled. These products which are short in the domestic market shouldn’t be exported to other countries. If such items are exported their prices will rise in the neighborhood market as a result of shortage.
Reduction in import duty:
If the work on imported goods is reduced it will certainly reduce the price of local sellers and enable them to offer their products in the neighborhood market at lower prices.
It’s quite effective method to manage the prices. In this approach the federal government appoints an amount control committee to steadfastly keep up stable price range in the country. Under this approach the sellers are banned to offer their products at high prices.