There are a variety of tools to control inflation, some of which include:
Monetary policy – Higher interest rates reduce demand in the economy, leading to lower economic growth and lower inflation. The introduction of higher interest rates will reduce spendings on non-essential items, resulting in lower demand and hence lower supply.
Control of money supply – Monetarists argue there is a close link between the money supply and inflation, therefore controlling money supply can control inflation. An increase in the supply of money typically lowers interest rates, which in turn, generates more investment and puts more money in the hands of consumers, thereby stimulating spending. Businesses respond by ordering more raw materials and increasing production.
Supply-side policies – policies to increase the competitiveness and efficiency of the economy, putting downward pressure on long-term costs.
Fiscal policy – a higher rate of income tax could reduce spending, demand and inflationary pressures.
Wage controls – trying to control wages could, in theory, help to reduce inflationary pressures. However, this method has been rarely used since the 1970s as human capital still remains a vital factor that will boost the economy through its workforce capabilities.
With current news and trending insights on the world's economic and social situation, what are some ways we can stay afloat despite all these rapid changes?