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Currency and Inflation - General Awareness Multiple Choice Questions and Answers

Questions
1 A cause of inflation is :
A increase in money supply
B increase in money supply and fall in production
C fall of production
D decrease in money supply and fall in production

Answer: Option [B]

A cause of inflation is increase in money supply and fall in production. The correct answer is Increase in money supply and Fall in production. Inflation is a caused when there is an increase in money supply and fall in production.

2 Inflation brings most benefit to which one of the following ?
A Government pensioners
B Creditors
C Savings Bank Account holders
D Debtors

Answer: Option [D]

The correct answer is Debtors. Inflation brings most benefits to debtors because people seek more money from debtors in order to meet the increased prices of commodities.

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3 Inflation is mostly harmful to which one of the following ?
A Debtors
B Creditors
C Business class
D Holder of real assets

Answer: Option [B]

The correct answer is Creditors. In economics, inflation is a sustained increase in the general price level of goods and services in an economy over a period of time. It is caused when increase in money supply and production falls. Inflation brings most benefits to debtors because people seek more money from debtors in order to meet the increased prices of commodities and hence creditors are at loss.

4 Which is correct with respect to inflation ?
A rise in budgets deficit
B rise in money supply
C rise in general price index
D rise in prices of consumer goods

Answer: Option [C]

The correct answer is rise in general price index. In economics, inflation is a sustained increase in the general price level of goods and services in an economy over a period of time. It is caused when increase in money supply and production falls. inflation results in rise in general price index.

5 Increasing unemployment and inflation is a situation of :
A hyperinflation
B galloping inflation
C stagflation
D reflation

Answer: Option [C]

Increasing unemployment and inflation is a situation of stagflation. A condition of slow economic growth and relatively high unemployment – economic stagnation – accompanied by rising prices, or inflation and a decline in Gross Domestic Product (GDP). Stagflation is an economic problem defined in equal parts by its rarity and by the lack of consensus among academics on how exactly it comes to pass.

6 Who among the following are not protected against inflation ?
A Salaried class
B Industrial workers
C Pensioners
D Agricultural farmers

Answer: Option [D]

The correct answer is Agricultural farmers. In economics, inflation is a sustained increase in the general price level of goods and services in an economy over a period of time. It is caused when increase in money supply and production falls. inflation results in rise in general price index. Agricultural famers are not protected against inflation.

7 The period of high inflation, low economic growth and high unemployment is termed as :
A stagnation
B take-off stage in economy
C stagflation
D none of these

Answer: Option [C]

The period of high inflation, low economic growth and high unemployment is termed as stagflation. The term 'stagflation' is used in economics to describe a situation where an inflation rate is high, the economic growth rate slows down, and unemployment remains steadily high.

8 Stagflation implies a case of :
A galloping inflation
B recession plus inflation
C adverse balance of trade
D rising wages and employment

Answer: Option [B]

Stagflation implies a case of recession plus inflation. Stagflation is a situation in which the inflation rate is high, the economic growth rate slows, and unemployment remains steadily high. The word is coined from stagnation and inflation.

9 Deficit financing aims to put more money into the economy by creating additional paper currency to fill the gap between expenditure and revenue. The device aims at economic development but if it fails, it generates :
A inflation
B devaluation
C deflation
D demonetisation

Answer: Option [A]

Deficit financing aims to put more money into the economy by creating additional paper currency to fill the gap between expenditure and revenue. The device aims at economic development but if it fails, it generates inflation.

10 A steady increase in the general level of prices as a result the aggregate demand is increasing in unsustainable rate as compared to aggregate supply is termed as :
A demand-pull inflation
B cost-push inflation
C stagflation
D structural inflation

Answer: Option [A]

A steady increase in the general level of prices as a result the aggregate demand is increasing in unsustainable rate as compared to aggregate supply is termed as demand-pull inflation.

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