Which of the following is/are used by the government as fiscal policy in order to combat inflation?

  1. Increase in Repo rate
  2. Reduction in public expenditure
  3. Issue of treasury bills

  Select the correct option from the codes given below:

Answer: [C] 2 & 3 Only

Money is borrowed by the government through issuance of securities, bonds and bills. Treasury bills (T-bills) offer short-term investment opportunities. The Government of India issues three types of treasury bills through auctions, namely, 91-day, 182-day and 364-day. When government borrows from market it reduces money in the hands of public and thus reduces spending which in turn helps to combat inflation. Government when reduces its public expenditures such as pension, provision, infrastructure, subsidies etc. then again it helps to curb inflation. Increase or decrease in Repo rate is a monetary policy carried by the central bank.

This question is a part of GKToday's Integrated IAS General Studies Module