Question 1

Stagflation means:&#10;A)inflation with stagnation&#10;B)recession with stagnation&#10;C)inflation galloping like stage&#10;D)inflation & increasing output

Accepted Answer

Stagflation is a situation where the economy experiences stagnation (slow or no growth) along with inflation (rising prices).

Question 2

Which is the most effective quantitative method to control inflation in the economy?&#10;A)bank rate policy&#10;B)selective credit control&#10;C)cash reserve ratio&#10;D)both (a) and (b)

Accepted Answer

cash reserve ratio&#10;

Question 3

Which measures are followed by the government for handling inflation?&#10;A)monetary measures&#10;B)fiscal measures&#10;C)controlling investments&#10;D)all of these

Accepted Answer

The government employs a combination of monetary measures (like adjusting interest rates), fiscal measures (such as altering government spending and taxation), and controlling investments to manage and mitigate inflation. These strategies are used in tandem to influence the economy's overall demand and supply, thereby stabilizing prices.

Question 4

Inflation is measured on the basis of:&#10;A)wholesale price index&#10;B)consumer price index&#10;C)marshall's index&#10;D)all of these

Accepted Answer

The answer of Inflation is measured on the basis of:&#10;A)wholesale...

Question 5

When price increases due to increase in factor prices it is .&#10;A)demand pull inflation&#10;B)cost pull inflation&#10;C)stagflation&#10;D)none of the above.

Accepted Answer

Cost pull inflation occurs when the prices of production inputs increase, leading to an increase in the cost of the final product. This type of inflation is driven by the rising costs of factors of production, such as labor and raw materials, rather than by an increase in demand.

Question 6

An unrealistically low unemployment target will most likely result in&#10;A)inflation.&#10;B)an unemployment rate falling below the natural rate.&#10;C)excessive monetary growth.&#10;D)all of the above.

Accepted Answer

An unrealistically low unemployment target can lead to inflation due to increased demand for goods and services, an unemployment rate falling below the natural rate as the economy overheats, and excessive monetary growth as policy measures are implemented to stimulate the economy, all of which are interconnected outcomes.

Question 7

Governments may pursue inflationary monetary policies&#10;A)to promote high employment.&#10;B)to accommodate demands of workers for higher wages.&#10;C)to finance a persistent budget deficit.&#10;D)for all the above reasons.

Accepted Answer

Inflationary monetary policies can be pursued by governments for various reasons, including promoting high employment, accommodating demands for higher wages, and financing persistent budget deficits. These policies can stimulate economic activity in the short term but may lead to inflation if overused.

Question 8

Economists from which of the following schools of thought are most likely to favor activist government policies?&#10;A)keynesian&#10;B)monetarist&#10;C)classical&#10;D)all of the above

Accepted Answer

Keynesian economists are most likely to favor activist government policies, such as using fiscal policy to manage economic cycles, compared to monetarists or classical economists who generally advocate for less government intervention.

Question 9

According to the monetarists, inflation is caused by&#10;A)supply shocks.&#10;B)expansionary fiscal policies.&#10;C)expansionary monetary policies.&#10;D)rising prices.

Accepted Answer

Monetarists, such as Milton Friedman, argue that inflation is primarily the result of too much money chasing too few goods, which is a consequence of expansionary monetary policies.

Deck 4: Understanding Inflation and Its Control in the Economy