Practice test

Inflation - Test Set 1

Review 20 exam-focused questions with detailed explanations, then start the interactive test when you are ready.

20 questions

Questions and explanations

  1. Question 1

    Deflation is a situation which:
    1. The value of money is falling
    2. The price of goods is increasing
    3. The value of money is increasing
    4. The price level is Stagnant
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  2. Question 2

    Stagflation Refers to a situation which is characterized by :
    1. Stagnant employment and deflation
    2. Deflation and rising unemployment
    3. Inflation and rising unemployment
    4. None
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  3. Question 3

    Who benefits the most during the inflationary period:
    1. Corporate servants
    2. Creditors
    3. Entrepreneurs
    4. Govt servants
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  4. Question 4

    Pump priming should be resorted to at a time of:
    1. Stagflation
    2. Inflation
    3. Deflation
    4. Reflation
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  5. Question 5

    Inflation is situation characterized by:
    1. Too much money chasing too few goods
    2. Too few money chasing too much goods
    3. Too many people chasing too few goods
    4. Too many people chasing too little money
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  6. Question 6

    Which of the following brings out the consumer price index number for industrial workers:
    1. RBI
    2. Commerce department
    3. The Labor Bureau
    4. None
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  7. Question 7

    The basis of determining dearness allowance to employees in India is:
    1. National Income
    2. Consumer Price Index
    3. Standard of Living
    4. Inflation Rate
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  8. Question 8

    In 2015 the nominal rate of interest in country was 6%, and the inflation rate then was 1.5%. So real rate of interest in 2015 was:
    1. 7.50%
    2. 4.50%
    3. 4%
    4. 0.25%
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  9. Question 9

    Stagflation is defined as:
    1. Low inflation, low growth, low unemployment
    2. High inflation, low growth, high unemployment
    3. High inflation, high growth, high unemployment
    4. Low inflation, high growth, low unemployment
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  10. Question 10

    An increase in the growth rate of the nominal money supply results in-
    1. Lower rate of inflation
    2. Higher rate of inflation
    3. Lower interest rates
    4. Currency appreciation
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  11. Question 11

    In 2015, the real rate of interest in a country was 6% and the inflation rate was 3%. So the nominal rate of interest in 2015 was-
    1. 3%
    2. 6%
    3. 9%
    4. 12%
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  12. Question 12

    If Money supply growth is faster than real GDP growth, it results in:
    1. Inflation
    2. Deflation
    3. Budget surplus
    4. Budget deficit
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  13. Question 13

    During a recession _______
    1. Producers will be cautiously optimistic
    2. There will be decrease in inventory
    3. There will be capacity under utilization
    4. There will be expansion in bank credit
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  14. Question 14

    In 2015, the nominal rate of interest in a country was 8% and the inflation rate then was 2.5%. So real rate of interest in 2015 was-
    1. 10.5 percent
    2. 8 percent
    3. 3 percent
    4. 5.5 percent
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  15. Question 15

    During a recession _______
    1. Producers will be cautiously optimistic
    2. There will be decrease in inventory
    3. There will be capacity under utilization
    4. There will be expansion in bank credit
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  16. Question 16

    Stagflation exists when:
    1. price indices and output both decrease
    2. price indices increase but output decrease
    3. price indices and output both increase
    4. price indices decrease but output increases
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  17. Question 17

    Stagflation is a period of _______
    1. Persistent high inflation combined with high unemployment
    2. Persistent high inflation combined with low unemployment
    3. Persistent low inflation combined with high unemployment
    4. Persistent low inflation combined with low unemployment
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  18. Question 18

    Inflation exists when:
    1. There is general increase in the prices over time
    2. There are periodic decreases in the price level
    3. There are continuous increases in the output level over time
    4. There is rise in the purchasing value of money
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  19. Question 19

    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:
    1. Deflation
    2. Stagflation
    3. Recession
    4. Depression
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  20. Question 20

    An increase of 1% per annum in the rate of growth of the money supply will increase inflation in the long run by:
    1. Zero percent
    2. One percent
    3. 0.5 percent
    4. More than one percent
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