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JAMB Economics 1998 Question 38

Question 38

Public Finance

If a government wants to reduce the level of inflation, it will

  1. A.run a budget surplus
  2. B.run a budget deficit
  3. C.run a balanced budget
  4. D.borrow more money.
Show the answer and explanation

Answer: A (run a budget surplus)

Explanation

A budget surplus takes more money from the economy in taxes than the government spends, reducing total demand and so inflation.