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Prelims-IAS –ECONOMICS MCQ Ans-19

QUESTION- Prelims-IAS –ECONOMICS MCQ-19
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1…

  • ANS-D
  • Deflation is a decrease in the general price level of goods and services.
  • Disinflation is a slow-down in the inflation rate (i.e. when inflation declines to lower levels).
  • Deflation increases the real value of money.

2…

  • ANS-D
  • Headline Inflation is a measurement of price inflation that takes into account all types of inflation that an economy can experience.
  • Unlike core inflation, headline inflation also counts changes in the price of food and energy.
  • Because food and energy prices can rapidly increase while other types of inflation can remain low, headline inflation may not give an accurate picture of how an economy is behaving.
  • Headline inflation is more useful for the typical household because it reflects changes in the cost of living, while core inflation is used by central banks because core inflation is less volatile and shows the effects of supply and demand on GDP better.

3…

  • ANS-B
  • Increase in repo rate decreases money supply in the economy which is used to curb inflation.
  • Ban of export of certain products raises supply of those products in the country’s economy so prices of those products reduce.
  • Earlier RBI used WPI indexes as a key measure for inflation but now it has switched to CPI (combined) as a key measure of inflation and take monitory policy decision according to CPI (combined). 

4…

  • ANS-B

5..

  • ANS-C
  • Inflation is controlled by limiting flow of currency in the economy and/or increasing the output of production.
  • Purchase of government securities from the public is inflationary as it would infuse more money to the market.
  • Repayment of public debt will release money in the market and hence increase inflationary trend.

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