Inflation — Set 3
Economics · मुद्रास्फीति · Questions 21–30 of 50
The 'Headline Inflation' figure in India usually refers to the inflation rate based on?
Correct Answer: D. Total CPI (Combined)
Headline inflation is the raw inflation figure as reported through the Consumer Price Index (Combined). It includes all items in the basket, including volatile food and energy prices. It represents the actual inflation experienced by households.
Which organization calculates the GDP Deflator in India?
Correct Answer: D. National Statistical Office (NSO)
The correct answer is 'National Statistical Office (NSO)'. The NSO, which is part of the Ministry of Statistics and Programme Implementation, calculates the GDP Deflator. The GDP deflator is the ratio of Nominal GDP to Real GDP. It is considered a very broad measure of inflation as it covers the entire economy.
What is the effect of 'Imported Inflation'?
Correct Answer: A. Prices rise because of high prices of imported raw materials
Imported inflation occurs when the prices of imported goods or raw materials rise on the global market. For a country like India, a rise in international crude oil prices is the most common cause. This increases the domestic cost of production and transport, leading to a general price rise.
Which index is used to calculate the Dearness Allowance (DA) for government employees in India?
Correct Answer: B. CPI (Industrial Workers)
The Consumer Price Index for Industrial Workers (CPI-IW) is used to determine the Dearness Allowance. It reflects the price changes in the basket of goods consumed by a typical industrial worker. This helps in adjusting the cost of living for employees and pensioners.
Inflation caused by a persistent rise in the price of one or a few commodities, while others remain stable, is called?
Correct Answer: B. Sporadic Inflation
Sporadic or sectional inflation refers to a price rise that is limited to specific sectors or goods. For instance, a poor harvest might cause food prices to skyrocket while other prices remain flat. It is the opposite of comprehensive inflation, which affects all goods and services.
When inflation is in double digits or triple digits (e.g., 20%, 100%), it is often called?
Correct Answer: D. Galloping Inflation
Galloping inflation is very high inflation where the price level increases by double or triple digits. It causes serious economic instability as money loses value very quickly. It is also known as jumping or running inflation.
The concept of 'Inflation Tax' refers to?
Correct Answer: A. The loss of value faced by holders of cash during inflation
Inflation tax is not an actual legal tax but a penalty on people who hold cash. As prices rise, the real value of the cash held by people decreases, effectively acting as a transfer of wealth to the government. This happens because the government can print money to pay off its debts.
The 'Base Effect' in inflation refers to the impact of?
Correct Answer: B. The price levels of the previous year on the current inflation rate
The base effect refers to the influence of the price level from the corresponding month of the previous year. If prices were exceptionally low last year, even a normal increase this year will show a very high inflation percentage. It is a statistical phenomenon that can sometimes distort the perception of actual inflation.
Which of the following is a 'Monetary Measure' to control inflation?
Correct Answer: C. Increasing the Repo Rate
Monetary measures are actions taken by the central bank (RBI) to manage the money supply. By increasing the Repo Rate, the RBI makes borrowing more expensive for banks, which reduces the liquidity in the economy. This helps in bringing down the aggregate demand and inflation.
If the price of only one commodity (like onions) rises while others are stable, the phenomenon is technically termed?
Correct Answer: A. Skewflation
Skewflation is an episodic price rise concentrated in one or a few commodities. It is a situation where there is a 'skew' in the price changes across different categories. This is common in India when seasonal vegetable prices rise due to supply shocks.