Question:
Which of the following is not a method of controlling inflation?
AControl over supply of currency
Brationing of goods
Ccontrol on demand
Dreduction in interest rate
Answer:
D. reduction in interest rate
Explanation:
Reducing interest rates typically stimulates borrowing, spending, and economic growth, which can actually fuel inflation.
The other options are methods to control inflation:
Control over supply of currency : Reduces money circulation, decreasing inflationary pressures.
Rationing of goods : Limits consumption, reducing demand-pull inflation.
Control on demand : Reduces aggregate demand, alleviating inflationary pressures.
To control inflation, interest rates are usually increased, not decreased, to ;
Reduce borrowing and spending
Increase savings
Reduce money circulation
Higher interest rates help combat inflation by reducing demand and slowing economic growth.