Q:

What are some ways to reduce inflation?

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Quick Answer

There are several types of policy employed to reduce inflation, including monetary, fiscal, supply side, exchange rate and wage control. Monetary policy, at least in the United Kingdom and United States, is considered the most important for keeping inflation low, according to Economics Help. It involves predicting inflation and increasing interest rates if it is expected to exceed inflation targets.

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Full Answer

Fiscal policy involves increasing tax rates and reducing government spending as a means of keeping inflation low.

Wage control is useful because sudden wage increases cause inflation. Controlling wages has proven difficult to enforce in the past, however.

Also difficult in practice as a means of reducing inflation is exchange rate policy. While keeping the value of a currency high against others helps to reduce inflation, it has led to recession in the past, states Economics Help.

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