Inflation is the general rise in the prices of goods and services in an economy, over a period of time. It reduces the purchasing power of consumers, because each unit of currency can purchase fewer products with an increase in the general price levels.
Below is a list of multiple-choice questions and answers on Inflation to help students understand the topic better.
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- High inflation levels in the economy leads to _______ in the supply of money.
- Increase
- Decrease
- No change
- None of the above
Answer: a
______ compared inflation with robbers.
- Amartya Sen
- Professor Brahmand and Wakeel
- Professor Jagdish Bhagwati
- Professor Key
Answer: b
Which of the following concepts is the opposite of inflation?
- Deflation
- Stagflation
- Recession
- None of the above
Answer: a
A government resorts to __________ to reduce inflation.
- Cuts in government spending
- Increase in government expenditure
- Reduction in repo rate
- None of the above
Answer: a
When the price levels of goods and services are falling continuously, this phenomenon is called _________.
- Deflation
- Stagflation
- Inflation
- None of the above
Answer: a
If too much money is chasing too few goods, the resulting inflation is known as __________.
- Stagflation
- Cost-push inflation
- Demand-pull inflation
- None of the above
Answer: c
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The main causes of inflation in India are ___________.
- The inadequate rise in industrial production
- Erratic agricultural growth
- Deficit financing
- All of the above
Answer: d
_____ is an effective method to control inflation in the economy.
- Cash reserve ratio
- Selective control of credit
- Bank rate policy
- None of the above
Answer: a
Inflation is measured by _______.
- Consumer price index
- Wholesale price index
- Marshall’s index
- None of the above
Answer: a
When inflation is a result of an increase in the price of factors of production, the result is ________.
- Stagflation
- Cost-push inflation
- Demand-pull inflation
- None of the above
Answer: b
The combination of stagnation and inflation is known as _____.
- Stagflation
- Cost-push inflation
- Demand-pull inflation
- None of the above
Answer: a
When the central government reduces the value of the domestic currency in terms of foreign currency, this phenomenon is called ______.
- Depreciation
- Appreciation
- Devaluation
- None of the above
Answer: c
In the context of inflation control, what does one mean when they say sterilisation of foreign inflow?
- Withdrawing an equivalent local currency to maintain the desired rate of exchange
- Complying with the regulations for import and export
- Filtering of the black money within an economy
- None of the above
Answer: a
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The Reserve Bank of India (RBI) can take the measure of _________ to control inflation within the country.
- Rationing of credit
- Introducing a progressive tax system
- Improving profits of the public sector
- Controlling public expenditure
Answer: a
Which one of the following steps taken by the Government of India effectively controlled the double-digit rate of inflation in the economy in the 1970s?
- Contain unproductive expenditure and budget deficits
- Pursue an export-oriented strategy
- Streamline public distribution system
- Enhance production of all public goods
Answer: a
The purchasing power of money varies ______.
- Directly with the volume of employment
- Inversely with the price level
- Directly with the interest rate
- Directly with the price level
Answer: b
How does inflation help in the redistribution of income?
- Disproportional change in prices
- Proportional changes in prices
- Falling prices
- Rising prices
Answer: a
The item with the maximum weightage in the Wholesale Price Index is _______.
- Food items
- Manufactured products
- Fuel and power
- None of the above
Answer: b
The Consumer Price Index helps to measure the degree to which ___________.
- Consumer prices have risen relative to the wage level in the economy
- Distribution of income between two different sets of income recipients at the same point in time
- Distribution of income between two different sets of income recipients during different periods
- None of the above
Answer: c
The share of food items within India’s total consumption expenditure has reduced within the last two decades because of _________.
- Increase in people’s income levels
- The availability of foodgrains has declined in the country
- Increase in the share of non-food items
- None of the above
Answer: a
Also See:
- MCQs on Indian Economy
- Difference between Internal Trade and External Trade
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Category: WHICH
