MCQ on Inflation and Price Index (Quiz)

Inflation and Price Index MCQ – Multiple Choice Questions and Answers on Inflation and Price Index. Test your understanding of Inflation and Price Index concepts by taking this quick MCQ quiz.

Question 1: In India, inflation is measured by the __________.

(A) Wholesale Price Index number

(B) Consumers Price Index

(C) Producer Price Index

(D) National Income deflation

Question 2: For measuring the changes in the price level of the country, which among the following index number is used? 

(A) Consumer price index number

(B) Production index number

(C) Security price index number

(D) Wholesale price index number

Question 3: Economic growth is usually coupled with ___________.

(A) Deflation

(B) Inflation

(C) Stagflation

(D) Hyper-inflation

Question 4: Inflation rate based on consumer price index increases if ___________.

(A) Bank rate is decreased

(B) Reverse repo rate is decreased

(C) Statutory Liquidity ration is increased

(D) Repo rate is increased

Question 5: Which is incorrect about inflation?

(A) Inflation indicated the rise in the price of basket of commodities on a point-to-point basis

(B) The inflation rate in India is calculated on the basis of the wholesale price index

(C) For some commodities retail prices are also considered for measurement of inflation

(D) Inflation rate going down does not mean prices are declining

Question 6: Inflation is best described as ___________.

(A) high prices

(B) increase in price index

(C) increase in purchasing power

(D) increase in price of particular goods

Question 7: Who amongst the following benefits most from inflation?

(A) Creditors

(B) Debtors

(C) Saving Bank Account Holders

(D) Government Pensioners

Question 8: Consider the following statements.

1. Inflation benefits the debtors.
   
2. Inflation benefits the bond holders.

Which of the statement(s) given above is/are correct?

(A) Only 1

(B) Only 2

(C) Both 1 and 2

(D) Neither 1 nor 2

Question 9: Which one of the following is NOT a method to control inflation?

(A) Controlling the demand

(B) Controlling the supply of money

(C) Reducing the rate of interest

(D) Rationing of commodities

Question 10: Which of the following price index number are used for calculation of Central Government employee wage compensation?

(A) Wholesale price index

(B) Consumer price index for industrial workers

(C) Consumer price index for agricultural labourers

(D) None of the above

Question 11: With reference to India, consider the following statements.

1. The Wholesale Price Index (WPI) in India is available on a monthly basis only.
   
2. As compared on Consumers Price Index for Industrial Workers [CPI(IW)] the WPI gives less weight to food articles.
   

Which of the following statement(s) given above is/are correct?

(A) Only 1

(B) Only 2

(C) Both 1 and 2

(D) Neither 1 nor 2

Question 12: Consider the following statements and state which is/are correct?

1. The sub-prime crisis which hit the U.S. economy was caused by sudden increase in oil prices.
   
2. The crisis led to default in home loan repayment.
   
3. It led to failure of some U.S. Banks.
   
4. Sub-prime crisis caused crash in Indian stock market.
   

Choose your answer from the given codes.

(A) Only 1

(B) Only 2 and 4

(C) Only 2, 3 and 4

(D) 1, 2, 3 and 4

Question 13: The most common measure of estimating inflation in India is __________.

(A) Price Index

(B) Wholesale Price Index

(C) Consumer Price Index

(D) Price Index of Index Goods

Question 14: Which one of the following statements is an appropriate description of deflation?

(A) It is a sudden fall in the value of a currency against other currencies

(B) It is persistent recession in both the financial and real sectors of economy

(C) It is a persistent fall in the general price level of goods and services

(D) It is a fall in the rate of inflation over a period of time

Question 15:

• Assertion (A): The rate of inflation in India has come down in the last three years.
  
• Reason (R): The country has received a large amount of foreign capital during these years.

Select the correct answer from the codes given below.

(A) Both (A) and (R) are true and (R) is the correct explanation of (A)

(B) Both (A) and (R) are true, but (R) is not the correct explanation of (A)

(C) (A) is true, but (R) is false

(D) (A) is false, but (R) is true

Question 16: An expression coined by economists to describe an economy that is growing at such a slow pace that more jobs are being lost than are being added ___________.

(A) Stagflation

(B) Recession

(C) Growth Recession

(D) Ratchet Inflation

Question 17: A rapid increase in the rate of inflation is sometimes attributed to the ‘base effect’. What ‘base effect’?

(A) It is the impact of drastic deficiency in supply due to failure of crops

(B) It is the impact of the surge in demand due to rapid economic growth

(C) It is the impact of the price levels of previous year on the calculation of inflation rate

(D) None of the statements (A), (B) and (C) given above is correct in this content

Question 18: In India, in the overall Index of Industrial Production, the indices of eight core industries have a combined weight of 37-90%.
Which of the following are among those eight core industries?

1. Cement
   
2. Fertilisers
   
3. Natural gas
   
4. Refinery products
   
5. Textiles

Select the correct answer using the codes given below.

(A) Only 1 and 5

(B) Only 2, 3 and 4

(C) Only 1, 2, 3 and 4

(D) 1, 2, 3, 4 and 5

Question 19: Index ‘Residex’ is associated with ___________.

(A) Share Prices

(B) Mutual Fund Prices

(C) Price Index

(D) Land Prices

Question 20: RESIDEX, an index of residential prices in India, was launched in the year __________.

(A) 2001

(B) 2004

(C) 2007

(D) 2008

Question 21: In calculation of index of wholesale prices, which one of the following sector is assigned maximum weightage?

(A) Food articles

(B) Non-food articles

(C) Fuel, power, light and lubricant

(D) Manufactured products

Question 22: Who has been recently made the chairman of the work group on revision of Wholesale Price Index Services?

(A) C. Rangrajan

(B) P.R. Panchamukhi

(C) K.C. Pant

(D) Abhijit Sen

Question 23: The base year for All-India Wholesale Price Index (WPI) has been changed by the Government of India from 2004-05 to ____________.

(A) 2010-11

(B) 2011-12

(C) 2012-13

(D) 2013-14

Question 24: Which of the following fixed the four percent inflation target in India with tolerance level of +/–2 percent for the period 2016 to 2021?

(A) Reserve Bank of India

(B) Government of India

(C) NITI Aayog

(D) Fourteenth Finance Commission

Question 25: Producer Price Index measures ___________.

(A) the average change in the prices of produced goods and services

(B) the marginal change in the prices of produced goods and services

(C) the total change in the prices of produced goods and services

(D) None of the above

Question 26: Increase in absolute and per capita real GNP do not connote a higher level of economic development, if ___________.

(A) industrial output fails to keep pace with agricultural output

(B) agricultural output fails to keep pace with industrial output

(C) poverty and unemployment increase

(D) imports grow faster than exports

Question 27: Match List-I with List-II and select answer using the codes given below in the lists.

Code