Which one of the following is a measure that can be used by the Government for combatting inflation?
- A. Increasing the non-planned expenditure on defence, police, etc.
- B. Providing more subsidies on exports
- C. Increasing the rate of interest on savings and fixed deposits ✓
- D. Reduction in the cash reserve ratio (CRR)
Correct Answer: C. Increasing the rate of interest on savings and fixed deposits
Explanation
Increasing the rate of interest on savings and fixed deposits encourages people to save rather than spend, thereby reducing aggregate demand and the money supply in the economy, which helps combat inflation.
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