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Prelims-IAS –ECONOMICS MCQ-20

1..Many of the advanced economies, mainly European countries and Japan, are struggling with problem of deflation. What are the ill effects of deflation?

  1. Reduces demand in the economy
  2. Increases the real debt-burden
  3. Reduces purchasing power of consumers
  4. Reduces export competitiveness

Select the correct answer using the codes given below.

(a)  1 and 2 only
(b)  3 and 4 only
(c)  1, 2 and 3 only
(d)  1, 2, 3 and 4


2..Recently Office of the Economic Advisor has taken the initiative of constructing Producer Price Index (PPI) for India.

  1. WPI covers both goods and services while PPI only goods.
  2. PPI is the average change in selling prices received by domestic producers for their output.

Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2


3..Consider the following statements regarding CPI:

  1. CPI measures the prices of goods that household consume while IIP measures volume changes in the production of economy.
  2. CPI is used by the Government to design fiscal policies and WPI as a deflator in National Accounting.

Which of the statement(s) given above is/are correct?
(a) 1 only
(b) 2 only

(c) Both 1 and 2
(d) Neither 1 nor 2


4..With reference to inflation in India, which of the following statements is correct?

(a) Controlling the inflation in India is the responsibility of the Government of India only.
(b) The Reserve Bank of India has no role in controlling the inflation.
(c ) Decreased money circulation helps in controlling the inflation.
(d) Increased money circulation helps in controlling the inflation


5..With respect to inflation in India, consider the following statements:

  1. Decline in fuel prices leads to sharper reduction in the Wholesale Price Index (WPI) as compared to the Consumer Price Index (CPI).
  2. Increase in food prices leads to sharper increase in the Consumer Price Index (CPI) as compared to Wholesale Price Index (WPI).

Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only

(c) Both 1 and 2
(d) Neither 1 nor 2


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