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Prelims-IAS –ECONOMICS MCQ-21

1..Which of the following factors may increase the level of inflation in an economy?

  1. Deficit financing
  2. Reduction in Indirect taxes
  3. Increase in Black money in the economy
  4. Defective supply chain

Select the correct answer using the code given below.

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


2..With reference to GDP deflator, a measure of general price inflation, consider the following statements:

  1. GDP deflator is more comprehensive measure of inflation than consumer price index and wholesale price index.
  2. Unlike WPI and CPI, monthly change in inflation cannot be tracked using GDP deflator.
  3. A GDP deflator value of zero implies no change in price levels from the base year.

Which of the statements given above is/are correct?

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


3..Which of the following hold significance for “Inflation Targeting”?

  1. Repo rates
  2. Cash Reserve Ratio
  3. Fiscal Consolidation
  4. Supply of Essential Commodities

Select the correct answer using the code given below.

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


4.. A Philips Curve indicates:

(a)  inverse relationship between rates of unemployment and corresponding rates of inflation.
(b)  positive relationship between rates of employment and government spending.
(c)  inverse relationship between rates of unemployment and GDP growth.
(d)  positive relationship between rates of employment and GDP growth.


5..Which of the following best describes the “Base effect” with reference to the inflation calculation?

 
(a) The impact on prices due to significant changes in the consumer base of a particular good or service.
(b) The impact on prices as a result of increase in taxes due to widening of indirect tax base.
(c) The impact on the prices due to rise in price levels in the previous/base year.
(d) The impact due to change in basket of commodities and services included in the calculation.


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