The fiscal policy and monetary policy will lead to reduction in inflation through increasing the tax rates and increasing the interest rates on the loan respectively.
Inflation refers to the rise in the prices of the goods and services due to the shortage of the supply of the products in the market. For example the prices of the jeans have increased from Rs1000 to Rs1500.
In order to reduce the inflation, government would increase the rates of the taxes and will reduce the spending this approach is known as Contradict fiscal policy.
Monetary policy is when the Central bank attempts to influence the money supply by increasing the interest rates on loan to stabilize the economy.
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