When price of the commodities consistently rises; it is called the situation of Inflation in the economy. Jagran Josh made this set of 10 questions based on the Inflation in India. This set is very useful for the aspirants of different competitive exams like IAS/PCS/SSC etc.
1. Inflation is the state in which ..............................
(a) The value of money decreases
(b) The value of money increases
(c) The value of the money increases first and then decreases
(d) The value of money decreases first and increases later
Explanation: Price of currency decreases.
2. How inflation affects the price of the commodities?
(a) Price of the commodities decreases
(b) Price of the commodities increases
(c) No effect
(d) First the price decreases later on increases
Explanation: Prices of goods are increasing.
3. When there is high inflation in the economy, how will it affect the supply of money in the economy?
(a) No effect on the money supply
(b) Supply of money decreases
(c) Supply of money increases
(d) None of the above
Explanation: Supply of money increases.
4. Which of the following class will not be negatively affected by the higher inflation?
(a) The consumer class
(b) The debtor class
(c) Pensioner class
(d) Business class
Explanation: The Business class will be richer by receiving the higher prices of the commodities.
5. What is a stagflation?
(a) A situation in which the economy experiences recession.
(b) A situation in which the economy have inflation and recession altogether
(c) An economy where unemployment is high
(d) Both b and c
Explanation: Both b and c
6. Who compared the inflation with the robbers?
(a) Professor Keynes
(b) Professor Jagdish Bhagwati
(c) Professor Brahmand and Wakeel
(d) Amartya Sen and JK Mehta
Explanation: Professor Brahmanand and Wakeel have compared the inflation to robbers.
7. Who wrote the book "How to pay for Money"?
(a) Amartya Sen
(b) Adam Smith
(c) Karl Marx
(d) Professor Keynes
Explanation: Professor Keynes
8. Which of the following concept is just opposite to deflation?
Explanation: Inflation refers to the increase in the price of the goods while deflation means the decrease in the price of the goods.
9. Which of the following measure is adopted to reduce inflation?
(a) Reduction in bank rate
(b) Reduction in Repo rate
(c) Increase in government expenditure
(d) Cuts in government spending
Explanation: Reduction in government expenditure reduces the supply of money in the economy, which further reduces inflation.
10. What is the base year for measuring inflation at wholesale Prices Index (WPI) in India?
Explanation: The new base year for measuring inflation is 2011-12.