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JAMB Economics 1992 Question 37

Question 37

Money and Inflation

To reduce the high rate of inflation in the economy, the Government should

  1. A.increase taxes and have a budget surplus
  2. B.increase taxes and have a budget deficit
  3. C.decrease taxes and have budget deficit
  4. D.decrease taxes and have a balanced budget
Show the answer and explanation

Answer: A (increase taxes and have a budget surplus)

Explanation

Higher taxes and spending less than revenue take money out of the economy, which reduces demand and inflation.