Fiscal Policy: Role and Evolution of Fiscal Policy

Fiscal Policy: Concept

Governmental financial policies and operations, concerning the raising and disbursement of funds, influence the economic behaviors and activities, and so the national income, employment, income distribution, price situation, international trade, etc. This realization has led to make deliberate adjustments in governmental income and expenditure policies and programs to attain the economic objectives. Such an adjustments is called the fiscal policy. So fiscal policy is concerned with the adjustments in the operation of the treasury to solve and attain economic problems and objectives.

Arthur Smithies defines fiscal policy as, "a policy under which the government uses its expenditure and revenue programs to produce desirable effects and avoid undesirable effects on the national income, production and employment."

According to Due and Friedlander, “By fiscal policy we refer to the governmental determination of the level and structure of taxes and expenditures, and the manner of financing a budgetary surplus or deficit to achieve the various macro-economic goals of full employment, price stability, growth, balance of payments equilibrium, and so forth.”

Ursula Hicks defines, “Fiscal policy is concerned with the manner in which all the different elements of public finance may collectively geared up to forward the aims of the economic policy.”

J. M. Keynes defines, “Fiscal policy is a policy that uses public finance as a balancing factor in the development of the economy.”

Evolution of Fiscal Policy

Since late 18th. Century until 1930’s, the ‘Laissez-faire’ policy guided public finance to make least possible interference on the functioning of free market mechanism. Then the ideals of sound public financial policy were:

1. reduction of public expenditure to the minimum possible limit;
2. tax structure be designed in such a way so that the market or price mechanism be disturbed to a little extent as far as possible; and
3. budget to be annually balanced.

The traditional belief did not recognize the possible effects of taxes and expenditure upon the level of national income and employment. Taxes were considered only a means to finance government expenditure, and not a means to regulate the economy. Similarly, borrowings to finance government expenditures in maintaining economic stability were not realized.

The Great Depression of 1930’s was a milestone in the evolution of fiscal policy with the operation public financial operation in influencing the economic activities. At that time, governments were to provide relief to the unemployed people and to revive the economy from depression by increasing the effective demand. J.M. Keynes advocated the use of public financial operation in this regard.

In 1940’s. the followers of Keynes like Lerner, Hansen, Dalton, and Beveridge added new dimension to fiscal policy to control inflation as well. Then the flexible or managed budgetary policy was realized and practiced as needed by the economic situation.

After the Second World War the importance of fiscal policy was further recognized in the developing countries. The urge for fast economic growth led to adopt planning in most of the developing countries. This led to the need for increasing governmental investments and regulate the private sectors’ investment activities in consistent with the plan objectives. In the late 1960’s, the significance of fiscal policy to promote distributive justice was realized. And in the 1970’s, the need for maintaining ecological balance (environmental protection) also became the part of fiscal policy.

Role of Fiscal Policy

1. Fiscal Policy and Economic Growth

In a simple way economic growth can be understood as the increase in the level of national production, and thus the national income. It is measured as the increase in Real GDP/GNP or Real Per Capita Income. Economic growth has a process. For growth the productive capacity of the economy should be increased, which is possible with the increase in capital formation. Capital formation needs increase in national investments. To increase national investments there is necessity to mobilize domestic savings by both the private and government sectors. Besides, attraction of foreign capital also helps in this concern.

Growth (G) = Investment Ratio (I) / Incremental Capital Output Ratio (ICOR)

So, economic growth depends on the size of the national investments and the size of the incremental capital output ratio. In the underdeveloped countries the necessary amount of savings and investments can not be generated only by the market system. And the government is to play the leading role with functioning as an investor, facilitator and regulator of the economy by using necessary fiscal policy.

Increase in national savings includes both the private savings and government savings (in the form of revenue surplus). Private savings can be increased and mobilized with establishment and expansion of the financial institutions of different nature supporting through expenditure (including subsidies), and tax incentives as tax-holidays, concessions, depreciation allowances, carry-over losses, expansion of business activities, etc. for the private sector.

National savings can also be increased with the imposition of taxes generating maximum potential revenue and minimizing the recurrent expenditure of government with substantial amount of revenue-surplus, borrowings and creation of extra money. Resource gap in development finance can be supplemented by receiving foreign aids as well as attracting private foreign investments. 

The public income from different sources may be used as expenditures on production activities by government itself, creation of physical infrastructures, research activities, promotional activities to increase the productive capacity of the economy. These investments also attract private investments.

2. Fiscal policy and Distributive Justice

In the underdeveloped countries there is wide inequality in the distribution of national income. One of the basic objectives of a welfare state is to minimize the inequality in national income distribution. For this, people in the lower income strata and underprivileged should be enabled to earn more. Fiscal policy can help in this concern.

Higher income in the UDCs largely goes on luxurious consumption and unproductive investments. Progressive taxes on higher income and wealth, luxurious consumption and unproductive investments generate substantial revenue for the government. At the same time, low rate of taxes or exemptions on production and consumption of mass consumption goods, if necessary even on imports and subsidy increases income of the low income people in an indirect way with reduction or control of prices.

Public expenditure on socio-economic upliftment of the poor people with the provision of free or subsidized education and training, health, safe drinking water and sanitation, housing, subsidy on financial support and special development programs help in enabling their earning capacity.

Similarly, priority for labor intensive technology helps to increase employment opportunities. Public expenditure on different developmental activities using labor intensive technology is desirable. Along with this, tax incentives for private sector absorbing more labor also help in this regard.

Public expenditure on social welfare activities like old-age pension and other allowances, operation of charitable institutions also promotes distributive justice. 

Minimization of regional disparities and rural-urban disparities through the creation of socio-economic infrastructures, fiscal incentives, subsidy and special development programs help in attracting economic ventures, creation of employment opportunities and utilization of local resources, and promote economic status of the relatively less developed regions.

3. Fiscal policy and Balanced Development

Development in totality refers to simultaneously development of all sectors (at least the major sectors) of the economy. It needs balanced development of the all sectors. There is interdependent relationship among the different sectors in the economy, which is indicated by the Input-Output Analysis. The output of a sector is used as inputs by different sectors, and for the output of a sector it needs the output of other sectors or industry as inputs.

So with the information about the inter-industrial or sectoral relationship from the Input-Output analysis, fiscal policy can help in maintaining balanced development of the economy. For this, fiscal policy in the form of tax incentives like holidays, concessions, depreciation allowances for both the input supplying and absorbing sectors or industries is desirable. Similarly, public expenditure on creation of infrastructures and provision of subsidy also help in this concern. 

The next aspect of balanced development is the proportional development of different regions or areas of the country to minimize the disparities in economic prosperity. Fiscal policy, in consistent with the regional planning strategy, can help in this concern. Discriminator tax-policies favoring or providing incentives to the investors in relatively less developed areas along with public expenditure on creation of infrastructures and provision of subsidy may attract and promote economic activities in such regions. This will lead to prosperity of the less developed areas, and will promote the proportional balanced development of all regions of the country.

---

You may also like:

• How monetary policy helps to control inflation?

• Dispute between Monetarism and Keynesianism

• Income Policy

• Measures needed to control inflation

• Study of Public Finance

• Stages of Public Policy

• Concept of Public Policy

---

How monetary policy helps to control inflation? | What are the objectives/goals of fiscal policy of underdeveloped countries?

What are the objectives/goals of fiscal policy of underdeveloped countries?

Fiscal policy plays a dynamic role in developing countries. The monetary policy alone is ineffective due to the existence of underdeveloped money and capital markets, fiscal policy can be used as an important adjustment to monetary policy in accelerating the rate of capital formation.

The importance / significance of fiscal policy in development countries are below:

i) Increase in rate of capital formation

One of the main objectives of fiscal policy is to increase the rate of capital formation. Capital formation is an important determinant of economic development. Saving and investment are the two components of capital formation. In the economy as saving flow is the formal investment in the productive sector, the rate of capital formation increases. Economic development takes place rapidly when the rate of capital formation increases. The fiscal policy should be formulated in such a manner as to increase the rate of investment both in public and private sectors. This needs large amount of financial resources which can be obtained by raising the increasing saving ratio and curtailing conspicuous consumption and unproductive investment. Fiscal policy helps in the formation of capital in two ways:

1. Fiscal policy expands investment in private and public sector through planning wise development. Specially, government invests in the economic sector. It helps to provide necessary means to invest in such sectors. It collects necessary amount for the progress of the physical capital formation and human capital formation.
2. Fiscal policy encourages unproductive investment to mobilize it in productive sector. This is done by making the tax free, low tax rate, subsidy, reduction policies etc. It helps in reducing unnecessary consumption and will increase capital formation rate, from unproductive sector to productive sector through the mobilization of resources.

ii) Resource mobilization

Resources are limited in developing countries. The aim of economic development can be obtained only if the limited resources are utilized optimally. The available resources should be mobilized rationally and effectively. Fiscal policy plays a central role for resource mobilization in the economy. The fiscal policy is more effective means for resource allocation and mobilization than any other means. In this context, according to Okun and Richardson, “The main task of fiscal policy in underdeveloped countries is to make available adequate saving for financing economic development from excessive low production and prepare the environment for increasing significantly the private investment activities.”

1. Fiscal policy provides tax facilities in order to increase saving and investment. Government may increase the tax rate and give priority for the public sector for investment.
2. Fiscal policy can be the means for mobilizing the investment and resources of agriculture to the productive sector such as trade, industry, tourism etc. then after the available saving from agriculture should be maintained in the form of tax to the economic development.

iii) Promotion in employment opportunity

Fiscal policy plays a crucial role to create conditions of full employment and provide with higher living standards. Fiscal policy therefore should aim at increasing employment opportunities and reducing unemployment. For this, government expenditure on economic and social overheads should be incurred to generate employment. Government should increase productive efficiency in the economy. Government can encourage labor based small industries by reducing tax or by providing subsidies. Likewise, government can increase local community development programs involving more labor and requiring less capital per head. Government should give greater emphasis to the family planning performance to control the high growth of population which is the major reason of population growth. For this reasons, above mentioned fiscal measures can help to increase employment.

iv) Effective role in counteracting inflation

In the initial stage of economic development, creeping inflation is not bad but higher inflation is dangerous in the economy. Inflation creates uncertainties which are the barrier for investment and economic growth. That is why fiscal policy can play an effective role in counteracting inflation. In this context, according to Henry C. Murphy, fiscal policy is an effective in counteracting inflation in developing countries as it is in industrial countries. The following are the effective roles in counteracting inflation:

1. Curtail government expenditure without changing tax rate: This increases the saving of government budget and reduces the purchasing power of public.
2. Curtail government expenditure with the increase in tax rate: This helps to increase the rate of saving and reduce the purchasing power of public. In this, aggregate demand will be decreased which help in controlling inflation.
3. Fixed in government expenditure with the increase in tax rate: Sometimes, government expenditure cannot be controlled. In such situation, inflation can be controlled by increasing tax rates with the help of reducing purchasing of public.
4. Curtail in government and reduce tax rates in equality: If the government expenditure and tax rate is unequal, inequality is reduced, the income between the beneficiaries of government expenditure and the class of tax payers will be redistributed. This process reduces the net propensity to consume and reduces more in the national income than government expenditure. Through this, the multiplier value of balanced budget will be greater than the unity and the effects occur against inflation.
5. Increase in government debt: Government may increase public debt and pull public saving which reduce purchasing and demand. This helps in controlling inflation.

v) Reduction of income inequality and wealth distribution

In underdeveloped countries, inequality of income and wealth distribution widely spread. This inequality is socially injustice and economically helpful. Until the problem of such inequalities exists in the economy. There will be hardly development of economy and social welfare. That’s why inequality of income exists and wealth distribution should be reduced. For this, fiscal policy plays very important role.

1. Implementation of progressive tax system: To achieve this, government has to impose high tax rate to the rich people and low tax rate or free tax to the poor people.
2. Levy tax on the basis of class of consumption pattern: Government should levy taxes at high rates on the luxurious goods and services, and on the other hand there should be lower tax rates on the goods and services that are consumed by poor people.
3. Increase facilities to the poor class: Basic facilities should be increased to make easier life for poor class than the rich class.
4. Expenditure on human capital for poor people: Government should spend a lot of money on physical capital and human capital. Such expenditure provides job opportunities for the poor people by developing human capital on them.

vi) Correct adverse balance of payment

Fiscal policy helps to correct adverse balance of payment. This policy discourages the import and encourages the exports of the economy. For this, government should reduce the taxes of imports and increase the tax of exports goods, subsidies and other facilities.

vii) Economic stability

One of the most serious problems of developing countries is economic instability. Generally, they are affected by inflationary tendencies. Fiscal policy adopts the various methods to maintain economic stability. Contra-cyclical fiscal policy should be adopted to offset the effects of fluctuations in world market prices thereby to promote economic stability in the economy. During the inflation, government can increase direct tax and reduce the government expenses to control the inflation. On the other hand, the government can increase public expenditure and decrease tax rate to control the deflation. During depression period, government should make deficit budget and surplus budget policy will be made in the period of prosperity. From this, stability will be maintained.

viii) Control inflation

The objective of fiscal policy should be to protect the economy of an underdeveloped country from the demon of inflation. Inflation can prove ruinous to an underdeveloped economy. It can undermine the very process of economic growth. As such, the fiscal policy of an underdeveloped country should be designed in such a manner as to curb inflationary forces arising during the process of economic growth.

Besides these, the objective of fiscal policy should be to eliminate, as far as possible, sectoral imbalances arising in the economy from time to time. Though the fiscal policy as visualized above, will help to maintain price-stability in the economy as a whole by curbing inflationary forces, there may arise sectoral price fluctuations in certain sectors of the economy on account of the existence of certain bottlenecks. To ward off that possibility, fiscal policy must be attuned to correct such imbalances in time before they could inflict any damage of the economy.

---

        You may also like to read:        

• Inflation: Demand Pull Inflation

• Effects of Inflation in the Economy

• Inflation: Cost Push Inflation

• Measures needed to control Inflation

• Goal / Role of monetary policy in an underdeveloped economy

• Meaning of Marketing Environment and Scope of Marketing Environment | Micro and Macro Environmental Forces

• Incomes Policy, Need and Working of Incomes Policy

The dispute between Monetarism and Keynesianism | Differences between Monetarism and Keynesianism Views on Supply of Money

A large part of modern monetary economics is characterized as having two views, the monetarist and the Keynesian or fiscalist. The conflicting views on the mechanism as to how money supply affects the general economic activities or income level. Some theorists put the emphasis on a direct relation between the money supply and expenditure. Some economists argue that it is by changing financial conditions particularly the rates of interest, volumes of lending and borrowing that influence of money supply on economic activities can be judged. According to the former school, an increase in the money supply means that some money holders will have excess money balance in their asset portfolios. In the process of restoring equilibrium, these balances will be converted into the real goods and services either directly or through the inter mediation of financial institutions.

The pressure of demand for more goods and services will stimulate output and encourage price rises until the value of the output has risen in proportion to the increase in the money supply. Monetary school gives no special emphasis on the rates of interest on the financial assets.

The other school points out that the increase in the money supply will affect cost and the availability of the credit. The superiority of monetary over Keynesian models has not been demonstrated. However, monetary factors are not unimportant; there is no reason to reject the view that changes in the interest rate or the availability of credit. Advocates to monetary approach have not yet shown that the changes in money supply have a reliable and predictable effect on expenditure, even the directions of causation between the money supply and income is at issue.

The most interesting event or a very long time in the real economics has been challenged by a new school of thought called ‘Monetarists’ led by its leader Milton Friedman of Chicago University. A debate continues to exist between one group, which places major stress on fiscal policy as the primary engine of growth and economic stabilizer, and a second group, which feels that money, and therefore monetary policy is the most important primary factor in growth and economic stability.

Monetarism refers to the followers of Milton Friedman who hold that ‘Only money matters’ and as such monetary policy is a more potent instrument than fiscal policy in economic stabilization. Keynesianism refers to the followers of Keynes who believe that ‘Money does not matter’, for economic stabilization, fiscal policy is a more powerful instrument than monetary policy. The difference between Monetarism and Keynesianism can be analyzed as follows:

Theoretical Differences

The monetarists emphasize the role of money in explaining short changes in national income. Friedman and Schwartz have shown that changes in the money supply cause changes in national income. The monetarists believe that all recessions and depressions are caused by severe contraction of money and credit, and booms and inflation by excessive increases in the money supply.

The Keynesians reject the monetarist view that changes in national income are caused solely by changes in money supply. They hold that changes in national income cause changes in the supply of money. The moderate Keynesians still believe such as monetarists that hyperinflation is caused by excessive money supply. On the other hand, the extreme Keynesians hold that non-monetary factors such as investment cause depressions and booms.

Monetarist View

As pointed by the monetarists, the money supply is the ‘dominant though not exclusive’ determinant of both the level of output and prices in the short-run, and of the level of prices in the long run. The long run level of output is not influenced by the money supply. It is dependent on such real factors as technology and the quantity and quality of productive resources. Although factors other than the money supply affect the level of output, employment and prices in the short-run, yet their effects are subordinate to that of the money supply.

A change in the money supply will inevitably affect the price level and output in the short run. But, in the long run, the effect of change in the money supply will be entirely on the price level because the economy is near full employment in that time period and the increase in national income will consist mainly of higher prices. Hence changes in the money supply affect national income directly. This is due to the assumption that the velocity of circulation of money is stable.

The monetarists hold that the rate of interest plays no part in determining the demand for money. The demand for money is the transactions demand for money, which is determined by the level of income. The monetarists believed that the money supply is also not influenced by interest rates. This insensitiveness of both demands for and supply of money is based on the quantity of money. The simplest quantity equation is MV = PQ, where M is the quantity of money, V is its velocity, Q is the number of physical transactions, and P is the price level. Taking PQ = Y, where Y is the national income, the quantity equation becomes MV = Y. As V remains constant, changes in M cause changes in Y.

The monetarist is based on the belief that money is a good substitute for all types of assets such as securities, houses, durable consumer goods etc. Prof. Friedman findings show a ‘stable money demand function’, which implies the demand for money is a stable function of peoples’ income. In other words, the amount of money that the people want to hold is related in a fixed way to their income. If the central bank increases the money supply, it affects interest rates on these different ways:

i) There is the liquidity effect, which causes a very short run reduction in the interest rates. As a result, people will sell securities and their holdings of money will increase. Therefore, they will spend their excess money balances on financial assets on durable consumer goods. This increase in aggregate expenditure on assets and goods will tend to rise output, employment and income. It is called output effect, which will tend to rise in interest rates because of the rise in output and demand for money resulting from the liquidity effect.

ii) There is the price expectations effect, which occurs due to the expectations of lenders that inflation will continue. They will demand higher interest rates in order to cover the expected inflation rate.

Thus, with the short run liquidity effect bringing a downward pressure on interest rates and both the output and price expectations effects bringing an upward pressure on them, the combined effect will be an increase in interest rates. It will, in turn, discourage investment, and reduce output and employment.

Keynesian View

The Keynesian hold just the opposite views to monetarists about the demand for and supply of money and the aggregate expenditure. Both the demand for and supply of money are highly interest elastic while the aggregate expenditure is not.

They consider the supply of money to be fixed in the short run by monetary authorities. The demand for money also called the liquidity preference is the desire to hold cash. There are three motives on the part of the people to hold cash: transactions, precautionary and speculative demand for money. Money held for transactions and precautionary motives is a function of level of income, and for the speculative motive, it is a function of interest rate.

To the Keynesians, it is expected about changes in both prices or in the market rate of interest that determine the speculative demand for money. The speculative demand for money is a decreasing function of the rate of interest. The higher the rate of interest, the lower the speculative demand for money, and vice-versa. But at a very low interest rate, the speculative demand for money becomes perfectly elastic.

On the whole, given the level of national income, the demand for money is a decreasing function of the interest rate. The Keynesians believe that money and financial assets is to be good substitutes for each other. They are highly liquid and yield interest. So, even small changes in interest rates lead to substitution between money and financial assets. A small fall in the interest rate will mean a rise in the price of securities, which will induce people to sell securities and hold more money. The reverse will be case in the event of a small rise in the rate of interest. Thus, the demand for money is highly interest-elastic under Keynesianism.

The Keynesians believe in the existence of unemployment equilibrium. This implies that an increase in money supply can bring about permanent increase in the level of output. The ultimate influence of money supply on the price level depends upon its influence on aggregate demand and the elasticity of the aggregate output.

The Keynesian chain of causation between changes in the quantity of money and in prices is an indirect one through the rate of interest. So, when the quantity of money is increased, its first impact is on the rate of interest which tends to fall. Given the marginal efficiency of capital, a fall in the rate of interest will increase the volume of investment. The increased investment will raise effective demand through the multiplier effect thereby increasing income, output and employment. Since the supply of factors of production is perfectly elastic in a situation of unemployment, wage and non-wage factors are available at constant rate of remuneration. There being constant returns to scale, prices do not rise with the increase in output so long as there is any unemployment. Under the circumstances, output and employment will increase in the same proportion as the quantity of money.

But 'once full employment is reached, output ceases to respond at all to changes in the supply of money and so in effective demand. The elasticity of supply of output in response to change in the supply, which is infinite as long as there was unemployment, falls to zero. The entire effect of changes in the supply of money is exerted on prices, which rise in exact proportion with the increase in effective demand’. Thus, so long as there is unemployment, output will be no change in prices; and when there is full employment, prices will change in the same proportion as the quantity of money.

In the Keynesian transmission mechanism, changes in the money supply affect aggregate expenditure and national income indirectly by changes in interest rate. Suppose the money is increased, it lowers the interest rate which, in turn, increases investment and expenditure thereby supply are transmitted into the level of income: for example, an increase in the money supply causes people to spend their excess holdings of money on financial assets. This means, an increase in the demand for such assets and a rise in their prices. Rise in the prices of assets (securities), brings down the interest rates which, in turn, increase aggregate expenditure, investment and hence income. Thus, according to the Keynesian view, a change in the money supply can only affect aggregate spending and national income first through changes in interest rates, and then only if the aggregate spending is sensitive to interest rate changes.

Policy Differences

Another point of differences between the monetarists and the Keynesians is over the policy prescriptions. According to the monetarists, monetary policy has a greater influence on economic activity than fiscal policy, and fiscal policy is important only by making changes in the money supply. On the other hand, the Keynesians emphasize the importance of both fiscal and monetary policy in influencing the economy but they attach more importance to the former than to the later. First, we study the monetarist view on monetary and fiscal policy and then the Keynesian view.

Monetarist View

The monetarists hold that changes in the money supply have a direct influence on aggregate expenditure and thus on income. It can be analyzed an expansionary monetary policy followed by monetarists. To begin, suppose the central bank purchased securities in the open market. It raises the price of securities and lowers the rate of interest. People will, therefore, start selling securities and hold more money. People spend their excess money balances on financial assets and durable consumer goods. Other attracted by low interest rates borrow from banks for expenditure on houses, durable consumer goods, plants and equipment, etc. The forces tend to increase aggregate expenditure and income.

Keynesian View

In contrast to the monetarists, the Keynesians regard monetary policy relatively less effective because of relative interest inelasticity in aggregate expenditure. In the expansionary monetary policy, the central bank purchases securities in the open market. As a result, the price of securities rises and the interest rate falls. People will therefore, start selling securities in order to hold more money. As the demand for money is highly interest elastic in the Keynesian system, even a small fall in the rate of interest will induce people to sell securities and hold more money.

The controversy between Keynesianism and monetarism can be list out as follows:

Differences	Monetarists	Keynesians
(i) Role of Money	Only money matters. In other words, only changes in money supply influence the level of nominal income.	Money does not matter. In other words, a change in money supply will not change nominal income; it will simply increase the idle cash balance for speculative motive.
(ii) Rate of Interest	Money supply alone should be watched closely because a change in money supply changes aggregates demand directly and not through interest rates.	Interest rates are important but the money supply is not. Interest rates affect planned investment and thus national output.
(iii) Monetary Policy	Use monetary policy rule for stabilization.	Monetary policy is seldom appropriate.
(iv) Fiscal Policy	Fiscal policy is absolutely ineffective because it has no effect on nominal aggregate demand.	Fiscal policy is powerful tool, as compared to monetary policy.
(v) Relationship between Money Supply and Price Level	There is direct and proportional relation between money supply and price level. So, MV = PQ	There will be some relationship between price level and money supply through investment and return but not directly proportional relation.
(vi) Economic Growth	Money supply, demand of money and interest rate can play major role for sustainable economic growth.	Government intervention promotes the economic activities because at that condition private sectors are not invested. So, government should promote economic activities.

Similarly, the monetarists advocated that the role of central bank is important whereas Keynesians believed that demand for resources, factor employment, and increase in income then effective demand which increase investment.

             You may also like to read:           

• Goal / Role of monetary policy in an underdeveloped economy

• How monetary policy helps to control inflation? | What are the objectives/goals of fiscal policy of underdeveloped countries?

• Measures needed to control Inflation | Monetary Policy, Fiscal Policy and Other Measures

• Incomes Policy, Need and Working of Incomes Policy

• Inflation and Demand Pull Inflation | Causes of Demand Pull Inflation

• Effects of Inflation in the Economy | Effects on Production | Effects on Consumption | Effects on Distribution

• Inflation, Cost Push Inflation | Supply Shock Inflation

• Fiscal Policy: Role and Evolution of Fiscal Policy