Prelims Revision Series | Economy | Inflation | 24

May 18, 2023

Which of the following is/are correct:
1 Moderate inflation is a stable inflation and not a serious economic problem.
2. Creeping Inflation is the mildest form of inflation.
3. When prices rise by more than 3% but less than 10% per annum, it is called as Walking Inflation.
Which of the statements given is/are correct?

(A) 1 and 3 only
(B) 2 and 3 only
(C) 1 and 2 only
(D) 1, 2 and 3 only

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Answer: (d)

Consider the following statements:
1 Built-in Inflation is caused by high demand for wages by the workers.
2. Cost Push Inflation is caused due to increase in the supply of money.
Which of the statements given below is/are correct?

(A) 1 only
(B) 2 only
(C) Both 1 and 2
(D) Neither 1 nor 2

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Answer: (a)

Which of the following are the causes of cost-push inflation?
1. Hoarding of commodities.
2. Low growth of Agricultural sector.
3. Depreciation of Currency.
Select the answer using the codes given below:

(A) 1 and 3 only
(B) 2 only
(C) 1 and 2 only
(D) 1, 2 and 3

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Answer: (d)

Which of the following are the measures to contain inflation?
1 Check on hoarding.
2. Increase in public expenditure.
3 . Reduction in indirect taxes.
2. Select the answer using the codes:

(A) 1 and 3 only
(B) 2 only
(C) 1 only
(D) 1 and 2 only

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Answer: (c)

Which of the following is/are correct?
1. GDP deflator is a measure of general price inflation.
2. Core inflation measures volatility caused by movements in food and energy prices.
Select the answer using the codes given below:

(A) 1 only
(B) 2 only
(C) Both 1 and 2
(D) None

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Answer: (a)

Which of the following is/are correct?
1. Wholesale price index measures price fluctuations in goods and services.
2. Wholesale price index is released by the Ministry of Commerce and Industry.
Select the answer using the codes given below:

(A) 1 only
(B) 2 only
(C) Both 1 and 2
(D) Neither 1 nor 2

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Answer: (b)

Which of the following is/are correct?
1. An inflationary gap measures the difference between the current level of real gross domestic product and the GDP that would exist if an economy was operating at full employment.
2. An inflationary gap can be caused by greater government expenditure.
Select the answer using the codes given below:

(A) 1 only
(B) 2 only
(C) Both 1 and 2
(D) Neither 1 nor 2

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Answer: (c)

The inflationary gap represents the point in the business cycle when the economy expands as consumers purchase more goods and services.
As demand increases but production lags, prices rise to restore market equilibrium.
An inflationary gap, when the demand for goods and services exceeds production, can be caused by high levels of employment, increased trade activities, or greater government expenditure.

Consider the following statements?
1 Higher food inflation as a result of the spike in cereal prices.
2. Higher core inflation.
3. Increased super core inflation.
Which of the above is/are the reasons for the spike in inflation in India during recent times?

(A) 1 and 3 only
(B) 2 only
(C) 1 and 2 only
(D) 1, 2 and 3

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Answer: (d)

What caused the spike in 2022-23?

There were 2 main reasons for the spike in inflation and they are:

1.Higher food inflation as a result of the spike in cereal prices.

2.Higher core inflation: It provides the underlying inflation of the economy. Core inflation rose from 6.1% to 6.2% and super core inflation rose to 6.3% from 6.2%.

Super core inflation: It is the measure of inflation calculated after deducting the gold and silver price inflation from the core inflation.

Which of the following is/are correct?
1. Consumer Food Price Index (CFPI) is a measure of change in retail prices of food items consumed by the population.
2. The base year used in CFPI is 2012.
Select the answer using the codes given below:

(A) 1 only
(B) 2 only
(C) Both 1 and 2
(D) Neither 1 nor 2

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Answer: (c)

With reference to deflation, consider the following:
1. falling prices
2. reduced money supply
3. unemployment
4. fall in the level of production.
Which of the above are the essential features of deflation?

(A) 2 and 3 only
(B) 1, 2, 3 and 4
(C) 1 and 2 only
(D) 1, 3 and 4 only

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Answer: (b)

Consider the following statements regarding Wholesale Price Index:
1. New series based on the recommendation of the Working Group chaired by Late Dr. Saumitra Chaudhari.
2. The new base year for WPI is 2016.
Which of the above given statement(s) is/are not correct?

(A) 1 only
(B) 2 only
(C) Both 1 and 2
(D) Neither 1 nor 2

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Answer: (b)

Which of the following is/are the causes of demand side inflation?
1 Changing consumer behaviour.
2. Growth in population.
3. Rising oil prices.
Select the answer using the codes given below:

(A) 1, 2 and 3 only
(B) 2 only
(C) 1 only
(D) 1 and 2 only

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Answer: (d)

Consider the following statements:
1 Core inflation is seen as a leading predictor of long-term inflation.
2. Headline inflation measures the change in average consumer prices after excluding transient price volatility.
Select the correct statement(s) using the codes given below:

(A) 1 only
(B) 2 only
(C) Both 1 and 2
(D) Neither 1 nor 2

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Answer: (a)

Consider the following statements:
1 Skewflation witnesses a price rise of one or a small group of commodities over a sustained period of time.
2. Creditors lose and debtors gain under inflation.
Which of the above statement(s) is/are incorrect?

(A) 1 only
(B) 2 only
(C) Both 1 and 2
(D) Neither 1 nor 2

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Answer: (d)

Consider the following statements:
1 The Labour Bureau has been compiling Consumer Price Index for Industrial Workers.
2. The Labour Bureau is an attached office of the Ministry of Labour.
3. National Statistical Office releases the All India Consumer Price Index.
Select the correct statement(s) using the codes given below:

(A) 1 and 3 only
(B) 2 and 3 only
(C) 1 and 2 only
(D) 1, 2 and 3

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Answer: (d)