What is the most common cause of demand-pull inflation? a) Increase in production costs b) Excessive demand in the economy c) Decrease in money supply d) Increase in taxation Answer: b) Excessive demand in the economy
Cost-push inflation occurs due to: a) Increase in aggregate demand b) Increase in production costs c) Reduction in money supply d) Decrease in government spending Answer: b) Increase in production costs
Which of the following is NOT a cause of inflation? a) Demand exceeding supply b) Increase in production costs c) Reduction in government expenditure d) Excessive money supply Answer: c) Reduction in government expenditure
What is hyperinflation? a) A situation of very high and typically accelerating inflation b) A situation where inflation remains constant over time c) Inflation caused by supply shocks d) None of the above Answer: a) A situation of very high and typically accelerating inflation
Which index is commonly used to measure inflation? a) Gross Domestic Product (GDP) b) Consumer Price Index (CPI) c) Balance of Payments (BoP) d) Wholesale Price Index (WPI) Answer: b) Consumer Price Index (CPI)
A sustained increase in the general price level of goods and services is referred to as: a) Deflation b) Inflation c) Stagflation d) Recession Answer: b) Inflation
What is the main objective of monetary policy in controlling inflation? a) Reducing the budget deficit b) Increasing public spending c) Regulating money supply and interest rates d) Boosting private investment Answer: c) Regulating money supply and interest rates
Which of the following is a consequence of high inflation? a) Increase in the purchasing power of money b) Fixed-income earners suffer a decline in real income c) Decrease in the cost of borrowing d) Price stability in the economy Answer: b) Fixed-income earners suffer a decline in real income
Which type of inflation occurs when both unemployment and inflation rise together? a) Demand-pull inflation b) Cost-push inflation c) Stagflation d) Deflation Answer: c) Stagflation
Which organization is responsible for controlling inflation in India? a) Reserve Bank of India (RBI) b) Ministry of Finance c) Securities and Exchange Board of India (SEBI) d) NITI Aayog Answer: a) Reserve Bank of India (RBI)
The term ‘inflation targeting’ refers to: a) Government fixing wages to control prices b) A central bank setting a specific inflation rate as its goal c) Increasing government spending to combat inflation d) Removing subsidies to control inflation Answer: b) A central bank setting a specific inflation rate as its goal
Which of the following fiscal policies helps control inflation? a) Increasing government spending b) Reducing taxation c) Decreasing government expenditure d) Lowering interest rates Answer: c) Decreasing government expenditure
What is the main tool used by central banks to control inflation? a) Increase in minimum wage b) Open market operations c) Devaluation of currency d) Encouraging imports Answer: b) Open market operations
Inflation that is unanticipated and leads to economic instability is called: a) Creeping inflation b) Core inflation c) Galloping inflation d) Unexpected inflation Answer: d) Unexpected inflation
Which sector is most negatively affected by high inflation? a) Export-oriented industries b) Agricultural sector c) Fixed-income earners and pensioners d) Large multinational corporations Answer: c) Fixed-income earners and pensioners
What is the effect of deflation on an economy? a) Increased consumer spending b) Decreased overall demand and economic slowdown c) Continuous rise in prices d) Expansion of credit facilities Answer: b) Decreased overall demand and economic slowdown
Which economic theory explains the relationship between inflation and unemployment? a) Keynesian Theory b) Classical Theory c) Phillips Curve d) Monetarist Theory Answer: c) Phillips Curve
How does inflation impact savings? a) It increases the real value of savings b) It erodes the purchasing power of savings c) It does not impact savings at all d) It ensures stable returns on savings Answer: b) It erodes the purchasing power of savings
What role does the Reserve Bank of India (RBI) play in inflation control? a) Regulating money supply and interest rates b) Controlling the fiscal deficit c) Setting minimum wage levels d) Managing public sector enterprises Answer: a) Regulating money supply and interest rates
What is headline inflation? a) Inflation that excludes volatile food and fuel prices b) Inflation measured by CPI including all goods and services c) A temporary rise in inflation d) Inflation caused by international trade deficits Answer: b) Inflation measured by CPI including all goods and services
