What Role Does Fiscal Policy Play In Helping Control Inflation?

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Inflation is an increase in the general level of prices for goods and services. What can cause inflation you may ask? Well inflation is caused by buyers buy things when the prices rise faster than income; this causes the people who buy to lose their purchasing power. If a storm hits a farm and the crops are destroyed the supply is low and when it is low prices go up, another example of this is if oil is spilled into the ocean and fish are dying than they are going to be in high demand since there is less, their prices will also go up. The consumers greatly cause prices to rise, they cause the prices to rise because for example, if a new apple device comes out the demand of it is high because people are crazy to buy their products, and this demand raises the prices because many need to be made for purchasing. Inflation can occur do to peoples habits, people now a day’s buy things without even thinking about it it’s all about spending …show more content…
The Fiscal policy helps the control of inflation by influencing by influencing our interest rates, tax rates and a government spending strategy. What the Fiscal policy really does is to maintain price stability, economic growth and have people employed in the country. The Fiscal policy also can have an effect on overall demand in the economy. Consumers spending, saving, and investing are affected by inflation in an important way. Employees who work that do not get raises once and awhile follow the inflation rate and lose their spending power. When retired people fix their pension monthly they also lose their spending power. People who like to spend money only have two choices in the matter and that is to save or borrow money and continue to spend. Consumers, when inflation occurs, may have to spend their disposable income to buy goods for themselves, also services. Investing is affected by inflation by giving us fewer returns in our