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A moderate rate of inflation is sometimes considered to be essential but it varies from country to country and from time to time but as the rate of inflation crosses the desirable limit, certain measures are undertaken to prevent increasing undesirable inflation. Countries use monetary measures to keep the inflation under control.
The monetary policy is defined as the plan of action undertaken a monetary authority especially the central bank of a country. The purpose of monetary policy is to regulate as well as control the demand and supply of money to public. The goal of monetary policy is to set the inflation rate and interest rate at such a level that the currency of the country remains stable and trust in the currency is ensured.
The fiscal measures to control inflation are comprised of government spending or expenditures, public borrowings and taxation. The people who study fiscal measures are known as fiscals and they assert that inflation is caused due to an excess of aggregate demand and aggregate supply.
An economy’s level of stability, employment rate of a country and an individual’s earning are deeply affected by the relationship of government’s spending and its tax rates implemented. A slight change in between these two can either cause inflation or deflation. These slight changes in tax rate and governments spending to control employment rate and demand for products are known as Fiscal policy.
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