CURRENCY INFLATION MCQS SET 03

CURRENCY INFLATION MCQS SET 03

21) Inflationary Gap is a situation characterised by :
A) excess of Aggregate Demand over Aggregate Supply at the full employment
level
B) gap between Galloping Inflation and Runaway Inflation
C) Inflation coupled with recession
D) Inflation that usually prevails in a developing country
Correct Answer: excess of Aggregate Demand over Aggregate Supply at the full employment level
   
22) Which of the following is wrongly matched?
A) Depression - Insufficient demand causing large scale unemployment of men and machinery over a long period of time
B) Recession - Reduction in demand and production/investment over a short
period of time
C) Stagflation - slow pace of economic activity due to falling prices
D) Boom - Rapid and all-round spurt in economic activity
Correct Answer: Stagflation - slow pace of economic activity due to falling prices
   
23) A high rate of inflation tends to worsen balance of payment because :
A) (a) prices of imported goods rise
B) (b) prices of exported goods rise making exports less competitive
C) (c ) prices of imported goods fall and hence more is imported
D) (d) prices of exported goods fall and hence less amount is obtained in terms of foreign exchange
Correct Answer: (b) prices of exported goods rise making exports less competitive
   
24) The effect of inflation on tax revenue results in a situation known as :
A) stagflation
B) fiscal drag
C) reflation
D) disinflation
Correct Answer: fiscal drag
   
25) Inflation is caused as a result of :
A) increase in money supply
B) fall in production
C) increase in money supply without a corresponding decrease in production
D) decrease in money supply without a corresponding decrease in production
Correct Answer: increase in money supply without a corresponding decrease in production

26) Which of the following accounts for Cost-Push Inflation?
A) Increase in money supply
B) Increase in indirect taxation
C) Increase in population
D) Increase in non-plan expenditure
Correct Answer: Increase in indirect taxation
   
27) The inflation experienced in the country at present is :
A) galloping inflation
B) secondary inflation
C) unrealistic inflation
D) cost-push inflation
Correct Answer: cost-push inflation
   
28) Which of the following Governmental steps has proved relatively effective in controlling the double digit rate of inflation in the Indian economy during recent years?
A) Containing budgetary deficits and unproductive expenditure
B) Streamlined public distribution system
C) Enhanced rate of production of all consumer goods
D) Pursuing an export-oriented strategy
Correct Answer: Containing budgetary deficits and unproductive expenditure
   
29) Of the various ways of financing government's investment expenditure, the least inflationary is :
A) foreign aid
B) deficit financing
C) taxation
D) public borrowing
Correct Answer: taxation
   
30) Devaluation' means :
A) converting rupee into gold
B) lowering of the value of one currency in comparison of some foreign currency
C) making rupee dearer in comparison to some foreign currency
D) None of these
Correct Answer: lowering of the value of one currency in comparison of some foreign currency