INFLATION & DEFLATION

Q1. Which of the following statements is/are correct?

1.High growth will led to inflation.

2.High growth will lead to deflation.

Select the correct answer using the codes given below

       a) Only 1

        b) Only 2

       c) Both 1 and 2

       d) Neither 1 and 2

Q2. Which one among the following is an appropriate description of deflation?

a) It is a sudden fall in the value of a currency against other currencies

      b) It is a persistent recession in the economy

     c) It is a persistent fall in the general price level of goods and services

     d) It is fall in the rate of inflation over a period of time

Q3. Which one of the following is likely to be the most inflationary, in its effect?

1.  Repayment of public debt
2.  Borrowing from the public to finance a budget deficit
3.  Borrowing from banks to finance a budget
4.  Creating new money to finance a budget deficit

Q4. A rice in general level of price may be caused by

1.  An increase in the money supply
2. A decrease in the aggregate level of output
3.  An increase in the effective demand

Select the correct answer using the codes given below

1. Only 1
2. Only 1 and 2
3.  Only 2 and 3
4. All of these

Q5. Gross national product at market prices is defined as

a) The market value of all finial goods and services produced in an economy taking in

to account net factor income from abroad

b) The market value of all final goods and services produced in an economy

c) The market value of all final goods and services produced in an economy plus indirect

taxes

d) The market value of all final goods and services produced in an economy plus indirect

taxes minus subsidies

Q6. World Development Report is an annual publication of

a) United Nations Development programme

b) International bank of reconstruction and development

c) World trade Organization

d) International monetary fund

Q7. Economic growth is usually coupled with

1. Deflation
2. Inflation
3. Stagflation
4. Hyper Inflation

Q8. A rapid increase in the rate of inflation is something attributed to the ‘Base Effect’ What is the

‘Base Effect’

1. It is the impact drastic deficiency in supply due to failure of crops
2. It is the impact of the surge in demand due to rapid economic growth
3. It is the impact of price levels of the previous year on the calculation of inflation rate
4. None of the above

Q9. To convert GDP at market price in to factor cost we need to

1. Deduct indirect taxes and added subsidies from it
2. Subtract subsidies from it and add indirect taxes to it
3. Deduct indirect taxes and subsidies from it
4. Deduct weight of inflation for the period from it

Q 10. Which one of the following measures is generally used the government to contain the

recession of the economy?

1. Increase money supply
2. Increase government spending
3. Decrease taxation
4. All of the above

ANSWERS:

1.A     2C     3D   4D   5 A   6 B   7B   8 C   9 A   10 D