Explain Measures To Control The Trade Cycle.


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Haider Imtiaz answered
1. Fiscal Measures: During the period of boom, decrease in public expenditures, increase in taxes and increase in public debt. On the other hand, during the period of depression, the policy of increase in public expenditures, decrease in taxes and decrease in public debt is adopted by the government.

2. Monetary Measures: Monetary measures mean that control of money and credit supply in the country. When we are facing boom or inflation, the central bank reduces the total quantity of money in circulation. The bank can adopt different measures like bank rate policy, open market operations and rationing of credit etc.
On the other hand, incase of depression, the central bank can increase the quantity of money by lowering the bank rate or purchasing the securities and discounted the bills of exchange.

3. International measures: Today every country has trade relation with other countries. If there is inflation or deflation in one country, it can be easily be carried top other countries, the example of great depression can be given. Business cycle is an international phenomena and it should be tackled on international level. Different measures have been suggested by the economists to control the business fluctuations effectively. Such as:
(a). Control of international production.
(b). International bill stock control and international investment control.

4. State control of private investment: If the govt. controls the private investment, cyclical fluctuations can be controlled within limits while the other economists who this agree with the above view, they say that private investment will be discouraged. But J.M. Keynes says that if we adopt the middle way we can control the fluctuations.

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