METHODS TO CONTROL INFLATION [ PART 3 ] #Inflation 3. MONETA | UPSC Economy
METHODS TO CONTROL INFLATION [ PART 3 ]
#Inflation
3. MONETARY POLICY
The governments may take recourse to tighter monetary policy to cool down either the demand-pull or the cost-push infations.
This is basically intended to cut down the money supply in the economy by siphoning out the extra money (as RBI increases the Cash Reserve Ratio of banks in India) from the economy and by making money costlier (as RBI increases the Bank Rate or Repo Rate in India). This is a short-term measure.
In the long-run, the best way is to increase production with the help of the best production practices.
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