Profile
Settings
Refer your friends
Sign out
An economy’s overall increase in the cost of goods and services can be described as “inflation.” Inflation is defined as a decrease in the buying power of money when the overall cost of goods and services increases. Inflation is the opposite of deflation, which is a long-term decline in the cost of living. Because of this, prices don’t rise in equal amounts. Inflation is commonly measured by the annualised percentage change in a broad price index, known as the inflation rate. Wages in the United States are calculated using both the consumer price index and the employment cost index.
Q:1 Money supply increases when inflation rises in the economy _____
- No change
- Decrease
- Increase
- None of the these
Answer: (3) Increase
Explanation:
In the long run, inflation raises your living costs. Inflation can have a negative impact on the economy if the rate is high enough. The rise in pricing may indicate that the economy is expanding at a rapid pace. To avoid rising prices in the future, people buy more than they need. demand for products and services is fueled by this
Q:2 ______ tried to compare inflation to robbers.
- Professor Brahmand and Wakeel
- Professor Key
- Amartya Sen
- Professor Jagdish Bhagwati
Answer: (1) Professor Brahmand and Wakeel
Explanation:
It was like Professor Brahmand and Wakeel were comparing inflation to thieves. According to them, both of these things take away something from the victims of inflation.
Q:3 Which one of the following principles is the exact reverse of inflation?
- Recession
- Stagflation
- Deflation
- None of the above
Answer: (3) Deflation
Explanation:
Deflation is when the prices of goods and services go down, which is called deflation. The rate of inflation is called deflation when it drops below 0%.
Q:4 Whenever the market prices of services and goods are going to fall continuously, this phenomenon is known as _________.
- Inflation
- Stagflation
- Deflation
- None of the above
Answer: (3) Deflation
Explanation:
When prices keep going down, this is called deflation.
Q:5 When too many funds are hunting down too few goods, the probable result of inflation is recognised as __________.
- Deflation
- Cost-push inflation
- Stagflation
- Demand-pull inflation
Answer: (4) Demand-pull inflation
Explanation:
As demand rises, prices go up. This is called demand-pull inflation. Economists call this just so much money chasing too many products.
Q:6 Once the reserve fund ratio (CRR) is continued to increase by the RBI, this will:
- Add more money to the economy.
- There will be no change in the amount of money in the economy.
- Decrease the supply of money in the economy
- At first, it influences the availability, but later on, it will automatically decrease.
Ans: (3) Decrease the supply of money in the economy
Explanation:
There are fewer funds available to banks when the CRR is raised by the RBI. This is because the banks have to keep more of their cash in hand with the RBI. Thus, when the Banks raise the CRR, the interest rates on loans they give out go up. Reducing the CRR takes money out of the system, which means there is less money in the system.
Q:7 Once inflation is an outcome of a rise in the value of production factors, the outcome is ________.
- Cost-push inflation
- Stagflation
- Demand-pull inflation
- Devaluation
Answer: (1) Cost-push inflation
Explanation:
It’s called “cost push inflation” and it’s when the prices of things like labour, raw materials, and so on go up. The price of these goods goes up due to a shortage of supply.
Q:8 The mix of inflation and stagnation is called _____.
- Demand-pull inflation
- Cost-push inflation
- Devaluation
- Stagflation
Answer: (4) Stagflation
Explanation:
Stagflation refers to a market that is experiencing both a rise in inflation and a slowdown in economic output at the same time.
Q:9 Once the central government cuts the value of a currency in terms of the international exchange rate; this phenomenon is known ______.
- Devaluation
- Depreciation
- Stagflation
- Appreciation
Answer: (1) Devaluation
Explanation:
Yet another reason a country might lower the value of its currency is to make up for a trade deficit. Having a country’s currency devalued makes its goods more competitive in the global market, which in turn raises the price of goods that come from that country.
Q:10 Inside the sense of controlling inflation, what would one make once they say forced sterilization of foreign inflow?
- Going to comply with the rules for importing and exporting things
- Filtering out the money that isn’t supposed to be there in a business
- Withdrawing an equivalent local currency to maintain the desired rate of exchange
- All of these
Answer: (3) Withdrawing an equivalent local currency to maintain the desired rate of exchange
Explanation:
Sterilization is a type of financial action during which a central bank tries to keep the money supply from being affected by changes in the amount of money coming in and going out. Sterilization usually means that a central bank buys or sells financial assets in order to make up for foreign exchange intervention.
Q:11 The Reserve Bank of India (RBI) could indeed hold the estimate of _________ To keep inflation in the country under control.
- Creating a tax system that is more progressive
- Controlling the public’s spending
- Improving the profits of the government
- Rationing of credit
Answer: (4) Rationing of credit
Explanation:
The Reserve Bank of India has the power to control inflation through monetary policies, which it does by raising bank rates, repo rates, cash reserve ratios, buying dollars, Rationing credit, regulating the money supply, and making credit easier to get. These actions help keep prices down.
Q:12 The acquiring power of money differs ______.
- Directly, the number of jobs grows.
- With the interest rate,
- With the price level,
- Inversely with the price level
Answer: (4) Inversely with the price level
Explanation:
It is the value of services and goods that can be bought with one monetary unit. Because prices keep going up, the value of money decreases over time. If you live outside of a country, your currency depreciates or is devalued. If you live inside of a country, your currency rises.
Q:13 The item that has the most weight in the Wholesale Cost Index is _______.
- Fuel and power
- Manufactured products
- power
- Food items
Answer: (2) Manufactured products
Explanation:
Manufactured Products make up 65% of the weight of the basket used in the Wholesale Price Index. Primary Articles like food, for example, make up 20% of the weight, and Fuel and Power make up 1% of the weight (14.9 percent).
Q:14 The Consumer Prices help in measuring the extent to which ___________.
- Prices for goods and services have gone up more than wages in the economy.
- Distribution of income between two different sets of income recipients during different periods
- Income that is given to two different groups of people at the same time.
- All of the above
Answer: (2) Distribution of income between two different sets of income recipients during different periods
Explanation:
Consumer Price Index shows how prices have changed over time for a basket of goods and services that people buy. It is the most common way to figure out how much inflation is going on in a given area.
Q:15 Stagflation called:
- Recession with stagnation
- Inflation & increasing output
- Inflation galloping like stage
- Inflation with stagnation
Answer: (4) Inflation with stagnation
Explanation:
Stagflation is when the economy doesn’t grow very quickly, and there are a lot of people out of work. At the same time, prices go up (i.e., inflation). Stagflation is when the money supply grows while the supply is limited.
Q:16 Which one of the following groups will not be negatively affected by the rise in prices?
- The debtor class
- The consumer class
- Pensioner class
- Business class
Answer: (4) Business class
Explanation:
The business class will be richer because they will get the goods at a higher price.
Q:17 Which one of the following ideas is just totally opposite to deflation?
- Disinflation
- Inflation
- Stagflation
- Recession
Answer: (2) Inflation
Explanation:
It means that the price of goods is going up, and it means that the price of goods is going down. Deflation is when the prices of goods and services go down, which is called deflation. There is deflation when the inflation rate is less than 0 percent.
Inflation lowers the value of money over time, but when there is a sudden deflation, it rises.
Q:18 Which one of the following observers is adopted to deduct inflation?
- Reduction in Repo rate
- Reduction in bank rate
- Increase in government expenditure
- Cuts in government spending
Answer: (4) Cuts in government spending
Explanation:
Government spending is cut back, which lowers the amount of money in the economy, which lowers inflation even more. It’s the rate at that the central bank lends money to commercial banks when they don’t have enough money or assets. The repo rate is lowered by the central bank in order to keep inflation in check.
Q:19 Stagflation assumes a situation of:
- adverse balance of trade
- recession plus inflation
- rising wages and employment
- galloping inflation
Answer: (2) recession plus inflation
Explanation:
Stagflation is when the inflation rate is very high, the economic growth rate is very slow, and unemployment is very high.
Stagnation and inflation are the two words that make up the word for it.
Q:20 Which of the following products has heavy capacity in the wholesale cost index in India?
- Manufactured product
- Fuel and power
- Primary article
- Food items
Answer: (1) Manufactured product
Explanation:
Manufactured Products make up 65% of the weight of the basket used in the Wholesale Price Index. Primary Articles like food, for example, make up 20% of the weight, and Fuel and Power make up 1% of the weight.
