Inflation and price rise are critical topics in economics, shaping the cost of living and impacting economies worldwide. Our article, Inflation and Price Rise GK MCQs With Answer & Explanation in English, provides a comprehensive collection of multiple-choice questions to enhance your understanding of these essential concepts.
Explore detailed answers and explanations to strengthen your knowledge and stay prepared for competitive exams. Dive in to learn the key factors driving inflation and how they influence price stability in markets.
1. A persistent fall in the general price level of goods and services is known as ___:
- Deflation
- Disinflation
- Stagflation
- Depression
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Answer: Deflation
Deflation is characterized by a consistent decrease in the general price level of goods and services, contrary to inflation where prices rise over time.
2. Which among the following is an anti-inflationary measure?
- Stagflation
- Hyperinflation
- Disinflation
- Deflation
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Answer: Disinflation
Disinflation is a term used when the rate of inflation decreases, indicating a slowdown in the rate at which the general price level of goods and services increases.
3. Which among the following terms is used for the coexistence of inflation and stagnation?
- Depression
- Recession
- Reflation
- Stagflation
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Answer: Stagflation
Stagflation describes a situation where an economy experiences both high inflation and high unemployment, alongside stagnant economic growth.
4. In the context of inflation control, what is the meaning of sterilisation for foreign inflow?
- Filtering the black money
- Compliance with import-export regulations
- Withdrawing an equivalent local currency to maintain a desirable rate of exchange
- Allowing currency trade futures
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Answer: Withdrawing an equivalent local currency to maintain a desirable rate of exchange
Sterilization of foreign inflow is a practice by central banks to counteract the effects of foreign capital inflow by withdrawing an equivalent amount of local currency from circulation, aiming to maintain a desired exchange rate.
5. Which among the following measures of controlling inflation can be taken up by the Reserve Bank of India and not by the Government of India?
- Introducing a progressive tax system
- Control over public expenditures
- Rationing of credit
- Improving profits of the public sector
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Answer: Rationing of credit
Rationing of credit is a measure within the domain of monetary policy, often implemented by the Reserve Bank of India, to control inflation. It restricts access to credit to reduce demand pressures.
6. Who among the following will be benefited by Deflation?
- Salary earners
- Pensioners
- Equity holders
- Debtors
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Answer: Debtors
Deflation generally benefits debtors because as prices fall, the value of money increases, making it easier to repay loans with cheaper currency.
7. Which of the following is not a measure to control inflation adopted by the Government or RBI?
- Monetary Policy
- Fiscal Policy
- Financial Inclusion
- Price Control
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Answer: Financial Inclusion
Financial Inclusion is not a measure to control inflation; it focuses on providing financial services to unbanked and underserved populations.
8. Consider the following statements regarding Cost Push Inflation:
1. Cost Push Inflation is a function of costs such as wages, rent, interest rates, etc.
2. Cost Push Inflation can be controlled easily in comparison to Demand Pull Inflation.
3. The purchasing power of Rupee decreases in the case of Cost Push Inflation.
Which among the above statements hold correct?
- Only 1
- 1 & 2
- 2 & 3
- 1 & 3
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Answer: 1 & 3
Cost-Push Inflation is caused by increased production costs like wages and raw materials, resulting in higher prices for goods and services. It can be more challenging to control than Demand-Pull Inflation. Core Inflation excludes volatile items like food and energy to provide a more stable measure of underlying inflation trends. Inflation erodes the purchasing power of money, leading to higher prices for goods and services, including bank products.
9. Many times we read in the newspapers about a term “Core inflation.” The Core inflation is different from general inflation because of the following?
- Core Inflation is caused by the supply shock in certain essential commodities.
- Core Inflation is the sudden increase in certain items of food grains.
- Core Inflation is the inflation rate of a particular basket of commodities.
- Core Inflation is just a misnomer.
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Answer: Core Inflation is the inflation rate of a particular basket of commodities.
Core inflation refers to the inflation rate of a particular basket of commodities, which excludes certain volatile items like food and energy. It is considered a more stable and reliable measure of underlying inflation trends.
10. When there is an inflationary trend in the economy, what would be the trend in the pricing of Bank Products?
- Increasing Trend
- Decreasing Trend
- Constant Trend
- There is no relevance of inflation in the pricing of Banking Products.
Show Answer
Answer: Increasing Trend
When there is an inflationary trend in the economy, the pricing of bank products is likely to show an increasing trend. Inflation erodes the purchasing power of money, leading to higher prices for goods and services, including bank products.
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