What will address cost push inflation through fiscal polic

Answer 1

One way to address cost-push inflation through fiscal policy is to reduce government spending and increase taxes. By reducing government spending, the overall demand in the economy decreases, which can help alleviate the upward pressure on prices caused by rising production costs. Increasing taxes can also help reduce consumer spending and curb inflationary pressures.

Another approach could be to implement policies that target the root causes of cost-push inflation, such as addressing supply chain disruptions or implementing regulations to prevent monopolistic behavior in certain industries. This can help stabilize prices and prevent continued increases in production costs.

Additionally, fiscal policy can also be used to support industries that are facing high production costs, such as providing subsidies or tax incentives to help offset these costs and prevent them from being passed on to consumers in the form of higher prices. This can help alleviate the inflationary pressures caused by rising production costs in specific sectors.

Overall, using fiscal policy to address cost-push inflation involves a combination of reducing overall demand in the economy, addressing the root causes of production cost increases, and providing targeted support to industries facing high production costs.