| 1 When the Government withdraws money from circulation. |
| 2. When Government imposes heavy direct taxes or takes heavy loans from the public |
| 3. When the Central Bank buys the securities in open market |
A) 1 and 2
B) 2 and 3
C) 1 and 3
D) 1, 2, 3
Correct Answer: A
Solution :
The reasons for deflation in the economy are: (i) When the Government withdraws money from circulation. (ii) When Government imposes heavy direct taxes or takes heavy loans from the public (voluntary or compulsory or both). (iii) When the Central Bank sells the securities in open market (which reduces the quantity of money in circulation). (iv) When Central Bank controls the credit money and adopt various measures such as increase in CRR, credit rationing and direct action. (v) When the Central Bank increases the Bank rate (which curtails the quantity of credit in the economy). (vi) When state of over-production (excess supply over demand) takes place.
You need to login to perform this action.
You will be redirected in
3 sec
