Question 1

When price increases due to increase in factor prices it is .

Accepted Answer

A)  demand pull inflation
B)  cost pull inflation
C)  stagflation
D)  none of the above. B

Question 2

Which measures are followed by the government for handling inflation?

Accepted Answer

A)  monetary measures
B)  fiscal measures
C)  controlling investments
D)  all of these D

Question 3

Inflation is measured on the basis of:

Accepted Answer

A)  wholesale price index
B)  consumer price index
C)  marshall's index
D)  all of these B

Question 4

Stagflation means:

Accepted Answer

A)  inflation with stagnation
B)  recession with stagnation
C)  inflation galloping like stage
D)  inflation & increasing output

Question 5

According to the monetarists, inflation is caused by

Accepted Answer

A)  supply shocks.
B)  expansionary fiscal policies.
C)  expansionary monetary policies.
D)  rising prices.

Question 6

Which is the most effective quantitative method to control inflation in the economy?

Accepted Answer

A)  bank rate policy
B)  selective credit control
C)  cash reserve ratio
D)  both (a)  and (b)

Question 7

An unrealistically low unemployment target will most likely result in

Accepted Answer

A)  inflation.
B)  an unemployment rate falling below the natural rate.
C)  excessive monetary growth.
D)  all of the above.

Question 8

Governments may pursue inflationary monetary policies

Accepted Answer

A)  to promote high employment.
B)  to accommodate demands of workers for higher wages.
C)  to finance a persistent budget deficit.
D)  for all the above reasons.

Question 9

Economists from which of the following schools of thought are most likely to favor activist government policies?

Accepted Answer

A)  keynesian
B)  monetarist
C)  classical
D)  all of the above

Exam 4: Understanding Inflation and Its Control in the Economy