demand & supply, profit loss, inflation & price index section 2 Practice Questions Answers Test with Solutions & More Shortcuts
Demand & Supply, Profit Loss, Inflation & Price Index PRACTICE TEST [3 - EXERCISES]
demand & supply, profit loss, inflation & price index section 1
demand & supply, profit loss, inflation & price index section 2
demand & supply, profit loss, inflation & price index section 3
Question : 16
The process of curing inflation by reducing money supply is called
a) Disinflation
b) Cost-push inflation
c) Down–pull inflation/Demand pull inflation
d) Reflation
Answer »Answer: (a)
The process of curing inflation by reducing the money supply is called disinflation.
Disinflation is a decrease in the rate of inflation – a slowdown in the rate of increase of the price level of goods and services in GDP. Cost pull inflation - It is caused by an increase in prices of inputs like Labour, raw material etc.
The increased price of the factors of production leads to the decreased supply of Goods. Demand-pull inflation - It is asserted to arise when Aggregate demand in an economy outpaces aggregate supply.
It involves inflation rising as real GDP rises and unemployment falls.
Question : 17 [RAS/RTS (Pre) 2008]
Which is incorrect about inflation?
a) For some commodities retail prices are also considered for measurement of inflation
b) Inflation rate going down does not mean prices are declining
c) Inflation indicated the rise in the price of basket of commodities on a point-topoint basis
d) The inflation rate in India is calculated on the basis of the wholesale price index
Answer »Answer: (c)
Question : 18 [CDS-2015-II]
Which of the following statements (s) are true with respect to the concept of “efficiency” as used in mainstream economics?
- Efficiency occurs when no possible re-organisation of production can make anyone better off without making someone else worse off
- An economy is clearly inefficient if it is inside the Production Possibility Frontier (PPF)
- At a minimum, an efficient economy is on its Production Possibility Frontier (PPF)
- The terms such as ‘ Pareto Efficiency’, ‘Pareto Optimality’ and ‘Allocative Efficiency’ are all essentially one and same which denote ‘efficiency in resource allocation’
a) 2 and 3 only
b) 1 and 4 only
c) 1 and 3 only
d) 1, 2, 3 and 4
Answer »Answer: (b)
When the re-organisation of production is not possible which can make anyone better off without making someone else worse off then efficiency occurs.
Pareto Efficiency, Pareto Optimality and Allocative Efficiency are all the same and indicates “efficiency in resource allocation”.
Question : 19
Consider the following statements :
- Inflation benefits the debtors.
- Inflation benefits the bond-holders.
a) Both 1 and 2
b) 2 only
c) 1 only
d) Neither 1 nor 2
Answer »Answer: (c)
Inflation redistributes wealth from creditors to debtors i.e., lenders suffer and borrowers benefit out of inflation.
Bondholders = this person has lent money (to debtors) and received bonds in return.
So he is a lender, he suffers, by the way, they haven’t specifically used the word – “inflation-indexed bonds”, hence we cannot say inflation benefits the bond-holders.
IMPORTANT indian economy mcq EXERCISES
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indian economy MCQ CATEGORIES
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» Introduction to Indian Economy
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» Planning, Economic Development & Five year Plans
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» National Income & Human Development Index
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» Agriculture Sector, Subsidy and Food Processing
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» Industries, Manufacturing & Service Sectors
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» Inclusive growth, Sustainable development and employment
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» Poverty & Unemployment
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» Introduction to Micro Economics
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» Introduction to Macro Economics
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» Macro fundamentals, GDP, Investment, Growth
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» Demand & Supply, Profit Loss, Inflation & Price Index
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» Fiscal Policy, Public Finance and Monetary Policy
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» Money Supply, Banking and Financial Institutions
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» Taxes Types, Methods & Budgeting Process
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» Banking, Security Market & Insurance
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