First, the fiscal policies are essential towards controlling the rate of inflation in the United States. These fiscal policies are important because they can assist in making an increase in the leakage rates of its flow from the circular flow. This is an important move because it can assist in managing all income flow additions that are attributed to the high rates of inflation in the United States. The demand-pull inflation is one of the entities that is reduced significantly by this strategy that come about through an increase in the unemployment rates and economic growth slackening. Some of the fiscal policies that can be applied include lowering government level expenses (Federick, 2007). Taking massive falls in the amounts borrowed in the sectors of the government that can be undertaken annually. Disposable income can also be reduced through the use of very high direct taxes on the people.
Second, the use of the monetary policies is also one of the realistic approaches that can be used in reducing the amount of inflation in the United States. Some of the monetary policies that can be applied in the reduction of inflation can include controlling high levels of inflation. This can be achieved through the reduction of real money circulating and enhancing an increase in the rates of interest (Federick, 2007). Bringing down the collective demand in the society is an essential strategy that can be applied in the American economy in order to reduce the inflation experienced in the economic perspectives of the country.
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Third, increasing the rates of interest is also an essential step towards managing the high rate of inflation in the United States. The high rates of interests are important because they can assist in discouraging the borrowing that exists among the people and the commercial entities. The increase can also be essential towards enhancing the saving rates among the people that can lead to the escalation of the opportunity cost associated with spending. Increasing the interest rates in also important towards reducing the amount of monetary inflation that is among the people because it can also act in discouraging the loans that are taken by the people and the business entities (Federick, 2007). This is also an important strategy because it plays a big role towards an increase in broad money in the public.
Fourth, the escalation of the rates of exchange is also a possible move that can be applied by the United States to assist in reducing the amount of inflation. This is because this move can assist in making an increase in the rates of interest in most of the markets associated with foreign exchange. A scheme that can be used to the increase in the rates of exchange include influencing the growth of wage rates this can include an initiation in the restriction in cash that are used in the making of employee payments in the public domain sectors (Federick, 2007). Commercial firm employees can be encouraged to have increased control that can assist in regulating and limiting increases in the payments that are made to employees in salaries and wages.
Fifth, the supply-side reforms can assist in the control and management of inflation in the United States. The production of more output at sufficient costs is an essential towards the achievement of consistent development and economic growth that can motivate stability in the monetary aspects of the United States (Federick, 2007). Therefore, the formulation and implementation of strict policies associated with the supply-side reform is imperative as one of the long-term methods that can be used in the control of inflation in the United States.
- Federick, S. M. (2007). Monetary Policy Strategy. Oxford: Oxford University Press.
