R.C.

Patel Educational Trust’s

Institute of Management Research & Development, Shirpur

FY BBA A 2.2 Managerial Economics

MCQ - Question Bank

MCQ- CHAPTER 6

1) When prices are falling continuously, the phenomenon is called:

(a)    Inflation

(b)    Stagflation

(c)     Deflation

(a)    Reflation

2) When too much money chases too few goods, the resulting Inflation is called:

(a)    Deflation

(b)    Demand-pull Inflation

(c)    Cost push inflation

(a)    Stagflation

3) Cause of Inflation in India is / are:

(a)    Deficit financing

(b)    Erratic agriculture growth

(c)     Inadequate rise in industrial production

(d)    All of the above

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

(a)    Bank rate policy

(b)    Selective credit control

(c)     Cash reserve ratio

(d)    Both (a) and (b)

5) Which measures are followed by the government for handling inflation?

(a)    Monetary measures

(b)    Fiscal measures

(c)     Controlling Investments

(a)    All of these

6) Inflation is measured on the basis of:

(a)   Wholesale price index

(b)    Consumer price index

(c)     Marshall’s index

(a)    All of these

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

(a)    Demand pull inflation

(b)    Cost pull inflation

(c)     Stagflation

(a)    None of the above.

8) Inflation is the state in which ..............................

(a) The value of money decreases

(b) The value of money increases

(c) The value of the money increases first and then decreases

(d) The value of money decreases first and increases later

9) How inflation affects the price of the commodities?

(a) Price of the commodities decreases

(b) Price of the commodities increases

(c) No effect

(d) First the price decreases later on increases

10) When there is high inflation in the economy, how will it affect the supply of money in
the economy?

(a) No effect on the money supply

(b) Supply of money decreases

(c) Supply of money increases

(d) None of the above

11)  Which of the following class will not be negatively affected by the higher inflation?

(a) The consumer class

(b) The debtor class

(c) Pensioner class

(d) Business class

12) Which of the following concept is just opposite to deflation?

(a) Stagflation

(b) Inflation

(c) Recession

(d) Disinflation

13)  Which of the following measure is adopted to reduce inflation?

(a) Reduction in bank rate

(b) Reduction in Repo rate

(c) Increase in government expenditure

(d) Cuts in government spending

14) Which out of the following is phenomenon that leads to Demand-Pull Inflation?

(a) It is a situation when aggregate demand in an economy outpaces aggregate supply

(b) It is a situation of persistent rise in inflation along with dip in growth and increase in
unemployment

(c) It is a situation caused by an increase in prices of inputs like labour, raw material etc
(d) It is a situation when a nation experiences very high and accelerating inflation.

15) Which out of the following is phenomenon that leads to Cost-Push Inflation?

(a) It is a situation when aggregate demand in an economy outpaces aggregate supply

(b) It is a situation of persistent rise in inflation along with dip in growth and increase in
unemployment

(c) It is a situation caused by an increase in prices of inputs like labour, raw material etc

(d) It is a situation when a nation experiences very high and accelerating inflation.

16) Which out of the following is phenomenon that leads to Hyperinflation?

(a) It is a situation when aggregate demand in an economy outpaces aggregate supply

(b) It is a situation of persistent rise in inflation along with dip in growth and increase in
unemployment

(c) It is a situation caused by an increase in prices of inputs like labour, raw material etc

(d) It is a situation when a nation experiences very high and accelerating inflation.

17) Which out of the following is phenomenon that leads to Deflation?

(a) It is a decrease in the rate of inflation – a slowdown in the rate of increase of the general price
level of goods and services

(b) It is a situation of persistent rise in inflation along with dip in growth and increase in
unemployment

(c) It is the situation where prices fall continuously or have tendency to fall

(d) It represents price rise in all goods and services but does not include articles from food and
energy sector.

18) What is the cause of inflation?

(a) If money supply increases.

(b) If the production rate falls.

(c) If money supply increases and production falls.

(d) Both money supply and production decreases.

19) When both unemployment and inflation increases, the situation is termed as,-
(a) Parainflation

(b) Hyperinflation

(c) stagflation

(d) Galloping inflation.

20) In terms of monetary and fiscal policies which type of inflation is easiest to fight?

(a). Demand pull.

(b). Cost push.

(c). Stagflation.

(Note - In terms of monetary and fiscal policies we have more control over demand than we
do costs. )

21) 1) When prices are falling continuously, the phenomenon is called:

(a)    Inflation

(b)    Stagflation

(c)     Deflation

(a)    Reflation

2) When too much money chases too few goods, the resulting Inflation is called:

(a)    Deflation

(b)    Demand-pull Inflation

(c)    Cost push inflation

(a)    Stagflation

3) Cause of Inflation in India is / are:

(a)    Deficit financing

(b)    Erratic agriculture growth

(c)     Inadequate rise in industrial production

(d)    All of the above

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

(a)    Bank rate policy

(b)    Selective credit control

(c)     Cash reserve ratio

(d)    Both (a) and (b)

5) Which measures are followed by the government for handling inflation?

(a)    Monetary measures

(b)    Fiscal measures

(c)     Controlling Investments

(a)    All of these

6) Inflation is measured on the basis of:

(a)   Wholesale price index

(b)    Consumer price index

(c)     Marshall’s index

(a)    All of these

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

(a)    Demand pull inflation

(b)    Cost pull inflation

(c)     Stagflation

(a)    None of the above.

8) Inflation is the state in which ..............................

(a) The value of money decreases

(b) The value of money increases

(c) The value of the money increases first and then decreases

(d) The value of money decreases first and increases later

9) How inflation affects the price of the commodities?

(a) Price of the commodities decreases

(b) Price of the commodities increases

(c) No effect

(d) First the price decreases later on increases

10) When there is high inflation in the economy, how will it affect the supply of money in
the economy?

(a) No effect on the money supply

(b) Supply of money decreases

(c) Supply of money increases

(d) None of the above

11)  Which of the following class will not be negatively affected by the higher inflation?

(a) The consumer class

(b) The debtor class

(c) Pensioner class

(d) Business class

12) Which of the following concept is just opposite to deflation?

(a) Stagflation

(b) Inflation

(c) Recession

(d) Disinflation

13)  Which of the following measure is adopted to reduce inflation?

(a) Reduction in bank rate

(b) Reduction in Repo rate

(c) Increase in government expenditure

(d) Cuts in government spending

14) Which out of the following is phenomenon that leads to Demand-Pull Inflation?

(a) It is a situation when aggregate demand in an economy outpaces aggregate supply

(b) It is a situation of persistent rise in inflation along with dip in growth and increase in
unemployment

(c) It is a situation caused by an increase in prices of inputs like labour, raw material etc

(d) It is a situation when a nation experiences very high and accelerating inflation.

15) Which out of the following is phenomenon that leads to Cost-Push Inflation?

(a) It is a situation when aggregate demand in an economy outpaces aggregate supply

(b) It is a situation of persistent rise in inflation along with dip in growth and increase in
unemployment

(c) It is a situation caused by an increase in prices of inputs like labour, raw material etc

(d) It is a situation when a nation experiences very high and accelerating inflation.

16) Which out of the following is phenomenon that leads to Hyperinflation?

(a) It is a situation when aggregate demand in an economy outpaces aggregate supply

(b) It is a situation of persistent rise in inflation along with dip in growth and increase in
unemployment

(c) It is a situation caused by an increase in prices of inputs like labour, raw material etc

(d) It is a situation when a nation experiences very high and accelerating inflation.

17) Which out of the following is phenomenon that leads to Deflation?

(a) It is a decrease in the rate of inflation – a slowdown in the rate of increase of the general price
level of goods and services

(b) It is a situation of persistent rise in inflation along with dip in growth and increase in
unemployment

(c) It is the situation where prices fall continuously or have tendency to fall

(d) It represents price rise in all goods and services but does not include articles from food and
energy sector.
18) What is the cause of inflation?

(a) If money supply increases.

(b) If the production rate falls.

(c) If money supply increases and production falls.

(d) Both money supply and production decreases.

19) When both unemployment and inflation increases, the situation is termed as,-

(a) Parainflation

(b) Hyperinflation

(c) stagflation

(d) Galloping inflation.

20) In terms of monetary and fiscal policies which type of inflation is easiest to fight?

(a). Demand pull.

(b). Cost push.

(c). Stagflation.

(Note - In terms of monetary and fiscal policies we have more control over demand than we
do costs. )

21) 1) When prices are falling continuously, the phenomenon is called:

(a)    Inflation

(b)    Stagflation

(c)     Deflation

(a)    Reflation

2) When too much money chases too few goods, the resulting Inflation is called:

(a)    Deflation

(b)    Demand-pull Inflation

(c)    Cost push inflation

(a)    Stagflation

3) Cause of Inflation in India is / are:

(a)    Deficit financing

(b)    Erratic agriculture growth

(c)     Inadequate rise in industrial production

(d)    All of the above

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

(a)    Bank rate policy

(b)    Selective credit control

(c)     Cash reserve ratio

(d)    Both (a) and (b)

5) Which measures are followed by the government for handling inflation?

(a)    Monetary measures

(b)    Fiscal measures

(c)     Controlling Investments

(a)    All of these

6) Inflation is measured on the basis of:

(a)   Wholesale price index

(b)    Consumer price index

(c)     Marshall’s index

(a)    All of these

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

(a)    Demand pull inflation

(b)    Cost pull inflation

(c)     Stagflation
(a)    None of the above.

8) Inflation is the state in which ..............................

(a) The value of money decreases

(b) The value of money increases

(c) The value of the money increases first and then decreases

(d) The value of money decreases first and increases later

9) How inflation affects the price of the commodities?

(a) Price of the commodities decreases

(b) Price of the commodities increases

(c) No effect

(d) First the price decreases later on increases

10) When there is high inflation in the economy, how will it affect the supply of money in
the economy?

(a) No effect on the money supply

(b) Supply of money decreases

(c) Supply of money increases

(d) None of the above

11)  Which of the following class will not be negatively affected by the higher inflation?

(a) The consumer class

(b) The debtor class

(c) Pensioner class

(d) Business class

12) Which of the following concept is just opposite to deflation?

(a) Stagflation

(b) Inflation
(c) Recession

(d) Disinflation

13)  Which of the following measure is adopted to reduce inflation?

(a) Reduction in bank rate

(b) Reduction in Repo rate

(c) Increase in government expenditure

(d) Cuts in government spending

14) Which out of the following is phenomenon that leads to Demand-Pull Inflation?

(a) It is a situation when aggregate demand in an economy outpaces aggregate supply

(b) It is a situation of persistent rise in inflation along with dip in growth and increase in
unemployment

(c) It is a situation caused by an increase in prices of inputs like labour, raw material etc

(d) It is a situation when a nation experiences very high and accelerating inflation.

15) Which out of the following is phenomenon that leads to Cost-Push Inflation?

(a) It is a situation when aggregate demand in an economy outpaces aggregate supply

(b) It is a situation of persistent rise in inflation along with dip in growth and increase in
unemployment

(c) It is a situation caused by an increase in prices of inputs like labour, raw material etc

(d) It is a situation when a nation experiences very high and accelerating inflation.

16) Which out of the following is phenomenon that leads to Hyperinflation?

(a) It is a situation when aggregate demand in an economy outpaces aggregate supply

(b) It is a situation of persistent rise in inflation along with dip in growth and increase in
unemployment

(c) It is a situation caused by an increase in prices of inputs like labour, raw material etc

(d) It is a situation when a nation experiences very high and accelerating inflation.

17) Which out of the following is phenomenon that leads to Deflation?

(a) It is a decrease in the rate of inflation – a slowdown in the rate of increase of the general price
level of goods and services

(b) It is a situation of persistent rise in inflation along with dip in growth and increase in
unemployment

(c) It is the situation where prices fall continuously or have tendency to fall

(d) It represents price rise in all goods and services but does not include articles from food and
energy sector.

18) What is the cause of inflation?

(a) If money supply increases.

(b) If the production rate falls.

(c) If money supply increases and production falls.

(d) Both money supply and production decreases.

19) When both unemployment and inflation increases, the situation is termed as,-

(a) Parainflation

(b) Hyperinflation

(c) stagflation

(d) Galloping inflation.

20) In terms of monetary and fiscal policies which type of inflation is easiest to fight?

(a). Demand pull.

(b). Cost push.

(c). Stagflation.

(Note - In terms of monetary and fiscal policies we have more control over demand than we
do costs. )

21) Stagflation is a situation of

(a) stagnation and deflation

(b) stagnation and recession

(c) stagnation and inflation

(d) stagnation and reccovery

22) Stagflation occurs when the economy experiences ?

(a)  rising prices and rising output

(b) rising prices and falling output

(c) falling prices and falling output

(d) falling prices and rising output