Which of the following steps should be taken when there is high inflation in an economy?
i.Increase direct taxes
ii.Reduce policy interest rates
iii. Decrease statutory reserve requirements (CRR and SLR) for banks
High inflation means there is more money supply in the market. Reducing interest rates and decreasing reserve requirements will further increase the money supply, so these actions are counterproductive. Increasing direct tax will reduce the money supply and will be helpful in controlling the inflation.
