Match the items of List I with the items of List II. List IList II 1. Increase in taxes a. Qualitative…

The correct matching is 1-c, 2-d, 3-a, 4-b. Raising taxes takes purchasing power out of the economy, so it is a deflationary fiscal measure. Open market operations change the total volume of bank reserves and credit, so they are a quantitative (general) credit control. Moral suasion is persuasion by the central bank to direct credit, a qualitative (selective) measure. Deficit financing adds to money supply and spending, so it is an inflationary fiscal measure. Matchings that call open market operations qualitative or tax increases inflationary reverse these effects.