CBSE 2025, Set 1

Question

(A) On the basis of the given image, explain the steps which may be taken by the Government of India to control the indicated macroeconomic issue.

![Inflation Control Cartoon](https://www.edvaya.com/images/cbse/economics/2025/set1/q13-inflation-bull-cartoon.webp)

(B) Define 'Open Market Operations'.

Edvaya · Accepted Answer

The correct answer is Subjective. The highlighted issue is **inflation**. To control inflation, the government may:
* increase the tax rates which may decrease the disposable income (purchasing power) in the hands of the general public. Consequently, it may lead to a fall in Aggregate Demand, thereby correcting the situation of inflation.
* decrease the public expenditure which may decrease the level of income in the economy. Consequently, it may lead to a fall in Aggregate Demand, thereby correcting the situation of inflation.

**(B)** Open Market Operations refers to buying/selling of government securities by the Central Bank from/to the general public in the open market.

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Economics > Introductory Macroeconomics > Government Budget

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