The government controls the fluctuation in the prices and brings price stability through taxes, subsidies and expenditure. This is the method through which government can bring price stabilisation. In case of inflation, government reduces its expenditures and in case of deflation or depression government reduces the taxes. The government provides subsidies for producing necessary goods like wheat, rice and sugar which results in the shift of resources from the production of luxury goods to the production of necessary goods. This brings economic stabilisation in the economy.
