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Measures To Reduce Inflation Essay

1998 Words8 Pages

Introduction
Unemployment and inflation are key components which can cripple the growth of a country, causing a negative impact on a countries’ economic activities. An ideal economy is where there is low unemployment and low inflation rates in a country. However, such economical balance is not always consistent, thus affecting the stability of the economy. One of the key functions of a government is being a solution provider and create a safety net with visionary leadership skills for the people to overcome the economic crisis. In such circumstances, both government and the people have to work together in implementing demand side policies comprising both expansionary and contractionary fiscal and monetary policies which would help to stimulate the aggregate demand and curb the unemployment and inflation rates. Implementation of measures such as short working hours, wage subsidy schemes, job credit schemes and skills upgrading would help to equip the labor force to meet the challenges of structural and cyclical unemployment. Reduction of taxes would …show more content…

When the aggregate demand increases against the aggregate supply, inflation increases and when aggregate supply increases against the aggregate demand, inflation decreases. Inflation causes money to lose its legal purchasing power. It causes redistribution in income and wealth. When prices increase and salary level of the employees remains the same, their cost of purchases are higher. As the price level of health, housing, medical and other basic necessities increases, it causes the cost of living standard to increase in a country. Employees would have to utilize their savings to match the shortfall. Savings gets depleted. Purchasing power decreases. If the government does not intervene, there could be negative repercussions as seen in The Great Depression,

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