if the economy is in an inflationary gap, and the government attempts to balance the budget, the effect will be to counteract inflation
What is counteract inflation?
- counteract inflation strategies that are more prevalent today include contractionary monetary policy.
- By raising interest rates, a contractionary policy seeks to reduce the amount of money in an economy. 5 Credit becomes more expensive as a result, which lowers consumer and company expenditure and slows economic growth.
- One of the best strategies for consumers to beat inflation is to invest in assets with returns higher than the rate of inflation. Instead of keeping cash on hand, experts often advise investing in diversified index funds based on broad market indices like the S&P 500.
- if the economy is in an inflationary gap, and the government attempts to balance the budget, the effect will be to counteract inflation
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