Inflation Problem And Policies CBSE Questions & Answers

Inflation Problem And Policies

This is Economics Class 11 Inflation Problem and Policies CBSE Questions & Answers. There are 15 questions in this test with each question having around four answer choices.

Questions & Answers

Wealth is redistributed from creditors to debtors when inflation was

A
Expected to be low and it turns out to be high.
Correct
B
Expected to be high and it turns out to be high.
C
Expected to be high and it turns out to be low.
D
Expected to be low and it turns out to be low.

In order to maintain stable prices, a central bank must

A
Tightly control the money supply
Correct
B
Keep unemployment low.
C
Maintain low interest rates.
D
Engage in counter-cyclical monetary policy.

Stagflation occurs when the

A
Price level increases and real GDP decreases
Correct
B
Price level decreases and real GDP increases.
C
Price level and real GDP decrease at the same time.
D
Price level and real GDP increase at the same time.

Rise in supply of money may not lead to an increase in the price level because

A
If the output level rises at the same rate
Correct
B
All of these
C
If the output level rises at the double rate
D
If the output level decreases at the same rate

When inflation rises, people desire to hold

A
More money and firms make less frequent price changes.
B
Less money and firms make less frequent price changes.
C
Less money and firms make more frequent price changes.
Correct
D
More money and firms make more frequent price changes.

Deflation would occur if the

A
Money supply grows at a slower rate than real GDP
Correct
B
Money supply grows at a less than real GDP
C
Money supply grows at a faster rate than real GDP
D
None of these

Inflation rate equals to

A
Real output minus the money supply
B
The money supply minus real output
C
The growth rate of money supply minus the growth rate of real output
Correct
D
The growth rate of real output minus the growth rate of the money supply

Deficit financing increases

A
Rate of money inflation
Correct
B
Rate of money deflation
C
Rate of money devaluation
D
None

A rise in the duty on alcohol, fuels and cigarettes, or a rise in Value Added Tax will leads to

A
Profit-push inflation
B
None of these
C
Fall in exchange rate
D
Higher indirect taxes
Correct

At first cut, the simple solution to fighting inflation is

A
Reducing the growth rate of the money supply
Correct
B
To impose price controls on businesses that attempt to raise prices.
C
Returning the economy to barter by prohibiting the use of fiat money.
D
Limiting the number of terms that politicians can serve in elective office.

Inflation occurs whenever

A
the price level rises continuously over a period of time
Correct
B
The price level falls continuously over a period of time.
C
The price level rises.
D
The money supply increases.

Cost-push inflation can result when

A
Workers decide to raise wages because they expect inflation to be high and want higher wages in order to keep up with inflation.
B
Workers decide to raise wages because they want to increase their real wages.
C
All of the above occur
Correct
D
The government gives in to the demands of workers for higher wages by implementing policies to raise aggregate demand.

Demand-pull inflation can result when

A
Only (a) and (b) of the above occur
B
a persistent budget deficit is financed by money creation
Correct
C
the deficit is financed by selling bonds to the public
D
policymakers set an unemployment target that is too high

Government has banned exports of wheat and non-basmati rice to enhance availability of goods in the domestic market is an example of

A
Fiscal policy
B
Monetary policy
C
None
D
Foreign trade policy
Correct

In many states wheat and rice etc. are available to the people living below the poverty line is an example of

A
Public distribution system
Correct
B
Fiscal policy
C
None
D
Monetary policy