Contractionary monetary policy is now a more popular method of controlling inflation. The goal of a contractionary policy is to reduce the money supply within an economy by increasing interest rates. This helps slow economic growth by making credit more expensive, which reduces consumer and business spending.
Increase Interest Rates on borrowed money
Increase Income Taxes
Increase Corporate Taxes
Increase Prices in General
During times of INFLATION what happens to BUSINESSES?
- They increase prices
- They delay raises
- They layoff employees
- They delay investments in the future
- They delay expansion project
- They delay hiring of new employees
- They decrease dividends to investors
- Their stock prices drop
- They become vulnerable to take-overs or mergers
- They shut down in house training programs
- They reduce contributions to charities
- They destroy economic impact in communties
What is ECONOMIC IMPACT?
For every dollar spent on payroll, 8-10 dollars are generated inside the local community from those payroll dollars...
For example:
- An employee pays for daycare
- The daycare owner buys supplies
- The supply company owner pays the market
- The market owner pays the farmer
- The farmer buys seeds and fertilizer
- The fertilzer company pays taxes
- The city tax dept hires employees
- The employees buy cars
- The car dealer take their spouse out to dinner
AND IT GOES ON AND ON AND ON...
The only way to stop or even reduce inflation is to keep the general public FROM BUYING... that hurts EVERYBODY...
NO WINNERS
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