Currency and Inflation - General Awareness Multiple Choice Questions and Answers

Answer: Option [D]

A very rapid or out of control growth in prices in which money loses its value to the point where ever barter may be preferable is known as Hyper- inflation. Hyperinflation refers to a situation where the prices of goods and services rise uncontrollably over a defined period of time. In general, the term is used when the rate of inflation increases at more than 50% a month.

Answer: Option [D]

The correct answer is All the above.

Answer: Option [C]

The correct answer is Fiscaldrag. Fiscal drag is an economic term whereby inflation or income growth moves taxpayers into higher tax brackets. This in effect increases government tax revenue without actually increasing tax rates.

Answer: Option [D]

The correct answer is increase in indirect taxation like higher VAT, excise duties etc. Cost-push inflation is an economic situation where the general price level in the economy rises for all the relevant goods owing to increase in their cost of production that results in some market change for the real output for those goods. Therefore, increase in wages and salaries results in increased cost of production that leads to inflation.

Answer: Option [A]

Under Section 22 of the Reserve Bank of India Act, RBI has sole right to issue currency notes of various denominations except one rupee notes. The One Rupee note is issued by Ministry of Finance and it bears the signatures of Finance Secretary, while other notes bear the signature of Governor RBI.

Answer: Option [C]

Broad money in India is M₃. Broad money (M3) includes currency, deposits with an agreed maturity of up to two years, deposits redeemable at notice of up to three months and repurchase agreements, money market fund shares/units and debt securities up to two years.

Answer: Option [B]

Increasing prices related to adverse effect on speculation.

Answer: Option [A]

The correct answer is Wholesale Price Index. Wholesale Price Index (WPI) represents the price of goods at a wholesale stage i.e. goods that are sold in bulk and traded between organizations instead of consumers. WPI is used as a measure of inflation in some economies. Annual rate of inflation based on all India Wholesale Price Index (WPI) number eases to 10.7% (Provisional) for the month of September, 2022 (over September, 2021) against 12.41% recorded in August 2022.

Answer: Option [D]

M₁ includes All of the above.

Answer: Option [C]

Monetary policy is regulated by Central Bank. Monetary policy is the process by which the monetary authority of a country, generally central bank, controls the supply of money in the economy by its control over interest rates in order to maintain price stability and achieve high economic growth. In India, the central monetary authority is the Reserve Bank of India (RBI).