Inflation refers to
A Fall in general price level
B Rise in general price level over time
C Rise in money supply only
D Fall in purchasing power of goods
Inflation is a sustained increase in the overall price level of goods and services.
Inflation results in a fall in
A National income
B Production
C Value of money
D Employment
When prices rise, the purchasing power or value of money declines.
Deflation is defined as
A Rise in prices
B Fall in prices due to excess demand
C Persistent fall in general price level
D Rise in money supply
Deflation is a continuous decline in the general price level.
Which of the following best describes creeping inflation?
A Prices rising very rapidly
B Prices rising at slow and steady rate
C Prices falling sharply
D Prices remaining constant
Creeping inflation refers to mild inflation, usually below 5% annually.
Galloping inflation refers to
A Mild increase in prices
B Moderate inflation
C Very high and accelerating inflation
D Falling prices
Galloping inflation involves rapid price increases, often double-digit.
Hyperinflation is characterized by
A Low price rise
B Stable prices
C Extremely high and uncontrollable price rise
D Negative inflation
Hyperinflation leads to collapse of monetary system due to runaway prices.
Demand-pull inflation occurs when
A Supply exceeds demand
B Aggregate demand exceeds aggregate supply
C Costs of production rise
D Money supply contracts
Excess demand pushes prices upward when supply cannot adjust.
Which factor causes demand-pull inflation?
A Rise in wages
B Increase in public expenditure
C Rise in cost of raw materials
D Decrease in productivity
Higher government spending increases aggregate demand.
Cost-push inflation is caused by
A Excess demand
B Rise in money supply
C Increase in cost of production
D Increase in exports
Rising input costs force producers to raise prices.
Which of the following is a cause of cost-push inflation?
A Increase in income
B Rise in wages
C Increase in savings
D Fall in population
Higher wages increase production costs, leading to price rise.
Inflation caused by increase in money supply is known as
A Structural inflation
B Cost inflation
C Monetary inflation
D Secular inflation
Excessive growth of money supply leads to monetary inflation.
Structural inflation arises due to
A Monetary expansion
B Supply bottlenecks in specific sectors
C Increase in exports
D Rise in interest rates
Structural rigidities and sectoral imbalances cause price rise.
Which type of inflation is associated with war and emergencies?
A Creeping inflation
B Demand-pull inflation
C Galloping inflation
D War-time inflation
War leads to scarcity and excess government spending, raising prices.
Inflation benefits
A Fixed income groups
B Creditors
C Debtors
D Pensioners
Debtors repay loans with money of lower purchasing power.
Inflation adversely affects
A Businessmen
B Debtors
C Creditors
D Government
Creditors receive repayment with reduced real value.
During inflation, which group gains?
A Wage earners
B Fixed income earners
C Borrowers
D Pensioners
Borrowers benefit as real burden of debt decreases.
Inflation leads to redistribution of income in favour of
A Fixed income groups
B Creditors
C Debtors and profit earners
D Pensioners
Profits and real asset holders gain during inflation.
One harmful effect of inflation is
A Increase in employment
B Rise in output
C Hoarding and speculation
D Reduction in public spending
Rising prices encourage hoarding, worsening shortages.
Inflation discourages saving because
A Interest rates rise
B Purchasing power of money falls
C Income falls
D Employment falls
Real value of savings erodes due to inflation.
Which of the following is an effect of inflation on production?
A Always increases production
B Always decreases production
C Creates uncertainty in business decisions
D Eliminates risk
Price instability discourages long-term planning.
Inflation affects balance of payments by
A Increasing exports
B Making exports expensive
C Increasing foreign investment
D Improving trade balance
Higher domestic prices reduce export competitiveness.
Deflation leads to
A Increase in demand
B Increase in employment
C Fall in investment
D Rise in profits
Falling prices reduce profits and discourage investment.
During deflation, the value of money
A Falls
B Rises
C Remains constant
D Becomes zero
Purchasing power of money increases when prices fall.
Which group gains during deflation?
A Debtors
B Borrowers
C Creditors
D Traders
Creditors receive money with higher purchasing power.
Deflation often results in
A Economic boom
B Unemployment
C High profits
D Price stability
Reduced demand leads to output contraction and unemployment.
Inflation can be controlled through
A Fiscal policy
B Monetary policy
C Direct controls
D All of the above
Combination of policies is used to check inflation.
Monetary measures to control inflation include
A Increase in government spending
B Increase in taxes
C Increase in bank rate
D Increase in subsidies
Higher bank rate reduces credit creation.
Raising the repo rate helps control inflation by
A Increasing money supply
B Making borrowing costlier
C Increasing consumption
D Increasing investment
Costly credit reduces borrowing and spending.
Open market sale of securities by RBI leads to
A Increase in liquidity
B Decrease in money supply
C Increase in inflation
D Increase in credit creation
Sale of securities absorbs excess money from economy.
Cash Reserve Ratio (CRR) controls inflation by
A Increasing bank lending
B Increasing money supply
C Reducing banks’ lending capacity
D Increasing deposits
Higher CRR reduces funds available for credit.
Fiscal measures to control inflation include
A Increasing public expenditure
B Reducing taxes
C Increasing taxes
D Increasing subsidies
Higher taxes reduce disposable income and demand.
Reduction in government expenditure helps control inflation because it
A Increases demand
B Reduces aggregate demand
C Increases supply
D Increases money supply
Lower government spending curbs excess demand.
Which of the following is a direct control method of inflation?
A Bank rate policy
B Credit rationing
C Price control
D Open market operations
Price controls directly restrict price rise.
Rationing helps control inflation by
A Increasing demand
B Ensuring equitable distribution
C Increasing hoarding
D Reducing supply
Rationing prevents artificial scarcity.
Wage-price spiral refers to
A Rise in wages leading to fall in prices
B Rise in prices leading to wage increase and vice-versa
C Stable wages and prices
D Fall in wages and prices
Continuous interaction between wages and prices fuels inflation.
Inflation during economic growth phase is known as
A Secular inflation
B War-time inflation
C Structural inflation
D Repressed inflation
Secular inflation accompanies long-term growth.
Repressed inflation occurs when
A Prices fall
B Demand exceeds supply but prices are controlled
C Supply exceeds demand
D Money supply contracts
Price controls suppress visible inflation.
Inflation erodes purchasing power, affecting most adversely
A Businessmen
B Shareholders
C Fixed income groups
D Government
Fixed incomes do not adjust quickly with prices.
Which of the following reduces inflationary pressure?
A Increase in money supply
B Reduction in production
C Increase in interest rates
D Increase in subsidies
Higher interest rates discourage borrowing and spending.
Inflation caused by imported goods becoming expensive is called
A Cost-push inflation
B Imported inflation
C Structural inflation
D Demand-pull inflation
Higher import prices raise domestic price level.
Inflation expectations can
A Reduce inflation
B Have no effect
C Worsen inflation
D Eliminate inflation
Expected inflation leads to higher wages and prices.
Deflation is more dangerous than inflation because it
A Raises prices
B Increases consumption
C Leads to unemployment and depression
D Reduces money value
Deflation causes prolonged economic slowdown.
Which policy is most effective against demand-pull inflation?
A Expansionary fiscal policy
B Contractionary monetary policy
C Increase in subsidies
D Price support policy
Reducing money supply curbs excess demand.
Cost-push inflation is difficult to control because
A It arises from demand
B It originates from supply side
C It is temporary
D It reduces costs
Supply-side constraints are harder to manage.
Which of the following indicates inflation rate?
A GDP deflator
B CPI
C WPI
D All of the above
All these indices measure price changes.
CPI mainly measures inflation from perspective of
A Producers
B Wholesalers
C Consumers
D Exporters
CPI reflects retail prices paid by consumers.
Wholesale Price Index (WPI) measures prices at
A Retail level
B Producer level
C Wholesale level
D Consumer level
WPI tracks price changes at wholesale stage.
Inflation targeting in India is responsibility of
A Government of India
B SEBI
C RBI
D World Bank
RBI targets inflation using monetary policy tools.
Moderate inflation is sometimes considered useful because it
A Reduces savings
B Encourages investment
C Reduces employment
D Causes uncertainty
Mild inflation may stimulate production and investment.
The most appropriate goal of anti-inflationary policy is
A Zero inflation
B Negative inflation
C Price stability
D High inflation
Stable prices promote sustainable economic growth.