Inflation

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1. The relationship between the value of money and the price level is an economy is-
(A) Direct
(B) Inverse
(C) Proportional
(D) Stable
Ans. (B)

2. The Result of cost push inflation is-
(A) Hindrances in economic development increases
(B) Adverse effect on Balance on Payment
(C) Hindrance in development
(D) All of the above
Ans. (D)

3. During periods of inflation, tax rates should-
(A) Increase
(B) Decrease
(C) Remain constant
(D) Fluctuate
Ans. (A)

4. Which of the following groups suffer the most from inflation?
(A) Debtors
(B) Creditors
(C) Business Class
(D) Holders of Real Assets
Ans. (B)

5. Inflation can be checked by-
(A) Increasing exports
(B) Increasing money supply
(C) Increasing government expenditure
(D) Decreasing money supply
Ans. (D)

6. Government securities are considered liquid because they are-
(A) Backed by the government treasure
(B) Convertible into other types of saving deposits
(C) Quickly and easily marketable
(D) Stable in value
Ans. (C)

7. Inflation is caused by-
(A) Increase in supply of goods
(B) Increase in cash with the government
(C) Decrease in money supply
(D) Increase in money supply
Ans. (D)

8. The Central Statistical Organisation (CSO) provides data under a new revised series in which the base year is taken as-
(A) 1960–61
(B) 2004–05
(C) 1980–81
(D) 1990–91
Ans. (B)

9. Which is NOT a measure undertaken by government to check inflation?
(A) Increase in consumption
(B) Increase in production
(C) Reduction in Deficit financing
(D) Taxation measures
Ans. (A)

10. Which of the following is a consequence of inflationary price rise?
(A) Obstacle in development
(B) Increase in economic inequalities
(C) Adverse effect on the balance of payment
(D) All of these
Ans. (B)

11. The supply-side measure to control inflation is-
(A) Reducing public expenditure
(B) Price control through Public Distribution System
(C) Higher taxation to mop up liquidity.
(D) Credit control
Ans. (B)

12. ‘Galloping Inflation’ is also known as-
(A) Walking Inflation
(B) Running Inflation
(C) Hyper Inflation
(D) Creeping Inflation
Ans. (C)

13. The Great Depression occurred during-
(A) 1914-18
(B) 1929-34
(C) 1939-45
D) 1922-26
Ans. (B)

14. The world wide Great Depression took place in-
(A) 1936
(B) 1929
(C) 1928
(D) 1930
Ans. (B)

15. State which of the following is correct? The Consumer Price Index reflects-
(A) The standard of living
(B) The extent of inflation in the prices of consumer goods
(C) The increasing per capita income
(D) The growth of the economy
Ans. (B)

16. Forced Savings refer to-
(A) Reduction of consumption consequent to a rise in prices
(B) Taxes on individual income and wealth
(C) Compulsory deposits imposed on income tax payers
(D) Provident fund contribution of private sector employees
Ans. (D)

17. When too much money is chasing to few goods, the situation is-
(A) Deflation
(B) Inflation
(C) Recession
(D) Stagflation
Ans. (B)

18. Which of the following groups suffer the most from inflation?
(A) Debtors
(B) Creditors
(C) Business class
(D) Holders of real assets
Ans. (B)

19. Which of the following can be used for checking inflation temporarily?
(A) Increase in wages
(B) Decrease in money supply
(C) Decrease in taxes
(D) None of these
Ans. (B)

20. Inflation occurs when aggregate supply is
(A) More than aggregate demand
(B) Less than aggregate demand
(C) Equal to aggregate demand
(D) None of these
Ans. (B)

21. The process of curing inflation by reducing money supply is called-
(A) Cost-push inflation
(B) Demand-pull inflation
(C) Disinflation
(D) Reflection
Ans. (C)

22. The term stagflation refers to a situation where-
(A) Growth has no relation with the change in prices
(B) Rate of growth and prices both are decreasing
(C) Rate of growth in faster than the rate of price increase
(D) Rate of growth is slower than the rate of price increase
Ans. (D)

23. Cheap Money means-
(A) Low Rate of Interest
(B) Low Level of Savings
(C) Low Level Income
(D) Excess of Black Money
Ans. (A)

24. In a period of inflation and price rise the supply of money remains-
(A) The same
(B) Increases
(C) Decreases
(D) Increases or decreases proportionately
Ans. (B)

25. Stagflation is a situation of-
(A) Stagnation and deflation
(B) Stagnation and recession
(C) Stagnation and inflation
(D) Stagnation and recovery
Ans. (C)

26. Deflation is a situation in which-
(A) The value of money is falling.
(B) The price of goods is increasing.
(C) The value of money is increasing
(D) The price level is stagnant.
Ans. (C)

27. Stagflation refers to a situation which is characterised by-
(A) Stagnant employment and deflation
(B) Deflation and rising unemployment
(C) Inflation and rising employment.
(D) Inflation and rising unemployment.
Ans. (D)

28. Who benefits the most during the inflationary period?
(A) Corporate servants
(B) Creditors
(C) Entrepreneurs
(D) Government servants
Ans. (C)

29. Pump priming should be resorted to at a time of-
(A) Inflation
(B) Deflation
(C) Stagflation
(D) Reflation
Ans. (B)

30. Inflation is a situation characterized by-
(A) Too much money chasing too few goods
(B) Too few money chasing too much goods
(C) Too many people chasing too few goods
(D) Too many people chasing too little money
Ans. (A)

31. Which of the following brings out the ’Consumer Price Index Number’ for Industrial workers?
(A) RBI
(B) The Labour Bureau
(C) Commerce Department
(D) NITI Ayog
Ans. (B)

32. The basis of determining dearness allowance to employees in India is-
(A) National Income
(B) Consumer Price Index
(C) Standard of Living
(D) Inflation Rate
Ans. (D)

33. In 2015 the nominal rate of interest in country was 6%, and the inflation rate then was 1.5%. So real rate of interest in 2015 was-
(A) 7.50%
(B) 4.50%
(C) 4%
(D) 0.25%
Ans. (B)

34. Stagflation is defined as-
(A) Low inflation, low growth, low unemployment
(B) High inflation, low growth, high unemployment
(C) High inflation, high growth, high unemployment
(D) Low inflation, high growth, low unemployment
Ans. (B)

35. An increase in the growth rate of the nominal money supply results in-
(A) Lower rate of inflation
(B) Higher rate of inflation
(C) Lower interest rates
(D) Currency appreciation
Ans. (B)

36. In 2015, the real rate of interest in a country was 6% and the inflation rate then was 3%. So the nominal rate of interest in 2015 was-
(A) 3%
(B) 6%
(C) 9%
(D) 12%
Ans. (C)

37. If Money supply growth is faster than real GDP growth, it results in _____.
(A) Inflation
(B) Deflation
(C) Budget surplus
(D) Budget deficit
Ans. (A)

38. During a recession _____
(A) Producers will be cautiously optimistic.
(B) There will be decrease in inventory
(C) There will be capacity under utilization.
(D) There will be expansion in bank credit
Ans. (C)

39. In 2015, the nominal rate of interest in a country was 8% and the inflation rate then was 2.5%. So real rate of interest in 2015 was-
(A) 3.2 percent
(B) 10.5 percent
(C) 8 percent
(D) 5.5 percent
Ans. (D)

40. Stagflation exists when _____
(A) price indices and output both decrease.
(B) price indices increase but output decreases.
(C) price indices and output both increase.
(D) price indices decrease but output increases.
Ans. (B)

41. Stagflation is a period of _______.
(A) Persistent high inflation combined with high unemployment
(B) Persistent high inflation combined with low unemployment
(C) Persistent low inflation combined with high unemployment
(D) Persistent low inflation combined with low unemployment
Ans. (A)

42. Inflation exists when
(A) There is general increase in the prices over time.
(B) There are periodic decreases in the price level.
(C) There are continous increases in the output level over time.
(B) There is rise in the purchasing value of money
Ans. (A)

43. In a period when an economy is facing price rise, and along with that there is slowing down
of economy activities, this is case of _________.
(A) Deflation
(B) Stagflation
(C) Recession
(D) Depression
Ans. (B)

44. An increase of 1% per annum in the rate of growth of the money supply will increase inflation in the long run by _______.
(A) Zero percent
(B) One percent
(C) 0.5 percent
(D) More than one percent
Ans. (B)

45. In which situation, wages and prices chase each other at a very quick speed?
(A) Disinflation
(B) Reflation
(C) Stagflation
(D) Hyper-inflation
Ans. (D)

46. What is moderate degree of controlled inflation called as?
(A) Reflation
(B) Stagflation
(C) Hyper-inflation
(D) Disinflation
Ans. (A)

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