Economics (Part – IX) - Mock Test 365

Total Questions: 50

11. Which of the following is the prime reason for inflation? [S.S.C. Online C.P.O.S.I. (T-I) 5.07.2017 (Shift-II)]

(a) Decrease in money supply
(b) Increase in money supply
(c) Decrease in supply of goods
(d) Increase in government cash

Correct Answer: (b) Increase in money supply

Solution:A sustained increase in the price level means there is inflation in the economy. Demand-pull inflation and Cost-push inflation are two types of inflation. Increase in money supply can cause inflation due to the fact that there is more money spending on the same amount of goods. It causes an increase in the prices of goods.

12. Stagflation is defined as________. [S.S.C. Online CHSL (T-I) 10.01.2017 (Shift-I)]

(a) low inflation, low growth, low unemployment
(b) high inflation, low growth, high unemployment
(c) high inflation, high growth, high unemployment
(d) low inflation, high growth, low unemployment

Correct Answer: (b) high inflation, low growth, high unemployment

Solution:Stagflation is the simultaneous appearance of an economy of low growth, high unemployment, and rising prices. Once thought by economists to be impossible, stagflation has occurred repeatedly in the developed world since the 1970s. Policy solutions for slow growth tend to worsen inflation, and vice versa.

13. In a period when an economy is facing price rise, and along with that there is slowing down of economy activities, this is case of_________. [S.S.C. Online CHSL (T-I) 7.02.2017 (Shift-III)]

(a) Deflation
(b) Stagflation
(c) Recession
(d) Depression

Correct Answer: (b) Stagflation

Solution:In a period when an economy is facing a price rise, and along with that there is a slowing down of economic activities, this is a case of stagflation.

14. Stagflation exists when_______. [S.S.C. Online CHSL (T-I) 25.01.2017 (Shift-III)]

(a) price indices and output both decrease.
(b) price indices increase but output decreases.
(c) price indices and output both increase.
(d) price indices decrease but output increases.

Correct Answer: (b) price indices increase but output decreases.

Solution:In a period when an economy is facing a price rise, and along with that there is a slowing down of economic activities, this is a case of stagflation.

15. __________is an economic scenario where a peculiar combination of low growth and rising inflation leads to high unemployment. [S.S.C. Online CGL (T-I) 24.08.2021 (Shift-I)]

(a) Recession
(b) Deflation
(c) Stagflation
(d) Depreciation

Correct Answer: (c) Stagflation

Solution:Stagflation is an economic scenario where a peculiar combination of low growth and rising inflation leads to high unemployment.

16. Inflation exists when- [S.S.C. Online CHSL (T-I) 7.02.2017 (Shift-I)]

(a) there is a general increase in the prices over time.
(b) there are periodic decreases in the price level.
(c) there are continuous increases in the output level over time.
(d) there is rise in the purchasing value of money.

Correct Answer: (a) there is a general increase in the prices over time.

Solution:Inflation occurs when there is a relatively rapid increase in the circulation of money as compared to the production of goods and services in the country. There is an inverse relationship between the value of money and inflation.

17. Inflation is- [S.S.C. Online C.P.O. S.I. 4.06.2016 (Shift-I)]

(a) increase in the supply of goods
(b) increase in cash with the government
(c) Decrease in money supply
(d) increase in the money supply

Correct Answer: (d) increase in the money supply

Solution:In case of inflation, more money has to be spent on fewer goods. In this situation, due to the increase in the supply of money, there is a continuous sharp cumulative and permanent increase in the price level due to excess demand in the economy.

18. Which of the following Acts was amended to provide a statutory basis for the implementation of the Flexible Inflation Targeting (FIT) frame-work? [S.S.C. Online C.G.L. (T-I) 9.03.2020 (Shift-I)]

(a) The Industrial Finance Corporation of India Act, 19481948
(b) Banking Regulation Act, 19491949
(c) Deposit Insurance and Credit Guarantee Corporation Act, 19611961
(d) Reserve Bank of India (RBI) Act, 19341934

Correct Answer: (d) Reserve Bank of India (RBI) Act, 19341934

Solution:

Reserve Bank of India (RBI) Act, 1934 was amended to provide a statutory basis for the implementation of the flexible inflation targeting (FIT) framework. The Reserve Bank of India was established under this Act. It provides the framework and guidelines for the banking system in India.

19. The market for sugar is in equilibrium. If the supply of sugar increases, the equilibrium price of sugar will_______ and the equilibrium [S.S.C. Online CHSL (T-I) 31.01.2017 (Shift-I)]

(a) increase; increase
(b) decrease; decrease
(c) increase; decrease
(d) decrease; increase

Correct Answer: (d) decrease; increase

Solution:The market for sugar is in equilibrium. If the supply of sugar increases, the equilibrium price of sugar will decrease and the equilibrium quantity will increase.

20. If Money supply growth is faster than real GDP growth, it results in_______. [S.S.C. Online CHSL (T-I) 22.01.2017 (Shift-III)]

(a) inflation
(b) deflation
(c) budget surplus
(d) budget deficit

Correct Answer: (a) inflation

Solution:If Money supply growth is faster than real GDP growth, it results in inflation.

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Economics (Part – IX)