Chapter 2
Inflation
Questions
Multiple Choice Questions
1. Which of the following is the best definition of inflation
(a) It is an increase in money stock
(b) It is a rise in money stock relative to supply of output.
(c) It is a steady and sustained rise in price level.
Answer: (c) It is a steady and sustained rise in price level.
2. Excess demand inflation may be cause by
(a) Increase in consumption
(b) Increase in investment
(c) increase in goverment expenditure
(d) All of them.
Answer: (d) All of them.
3. Inflationary gap is the excess of
(a) Expanditure over output
(b) Expected Expanditure over output
(c) Expected expenditure over full employment output.
Answer: (c) Expected expenditure over full employment output.
4. Cost-push inflation involves the co-existence of
(a) Increase in price level and increase in umemployment
(b) Increase in price level and full employment
(c) Increase in price level and increase in employment.
Answer: (a) Increase in price level and increase in umemployment.
5. Supply inflation is caused by
(a) Wage push
(b) Mark-up pricing
(c) Profit push
(d) All the above
Answer: (d) All the above.
6. Friedman's monetarist approach explains that the rate of inflation is determined by
(a) Growth rate of real income
(b) Growth rate of money supply
(c) Both of them
Answer: (c) Both of them
7. Supply inflation can be effectively controlled through
(a) Increase in productivity
(b) Incomes Policy
(c) Control of mark-up
(d) All the above
Answer: (d) All the above.
Very Short Answer Type Questions
1. Define inflation.
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2. When does true inflation occur ?
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3. What is safe rate of inflation ?
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4. What is meant by demand-pull inflation ?
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5. What is meant by cost-push inflation ?
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6. What is inflationary gap ?
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7. What is meant by mark-up inflation ?
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8. What is profit-push ?
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9. What quantity theory viewpoint on inflation ?
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Short Answer Type Questions
1. Inflation singnifies too much money chasing two few goods. Comment.
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2. Explain briefly the excess demand inflation.
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3. How can the inflationary gap be measured ?
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4. What factors cause supply inflation ?
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5. What is mixed demand inflation ?
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6. What is the essence of the structural theory of inflation ?
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7. What is monetarist approach to inflation ?
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8. How can excess demand inflation be controlled?
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Long Answer Type Questions
1. Give the meaning of inflation.
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2. What are the problems in the measurement of inflation ?
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3. Distinguish between cost-push inflation and demand-pull inflation.
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4. What is inflationary gap? How can it be quantified?
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5. What are the factors that affect inflationary gap?
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6. Analyse the effect of wage-push on inflation.
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7. Explain clearly the cost-push theory of inflation.
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8. Discuss Friedman's view about monetarist approach to inflation.
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9. How can demand-pull inflation be controlled?
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10. What measures can moderate cost-push inflation?
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Very Long Answer Type Questions
1. Explain clearly the meaning of inflation.
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2. Discuss difficulties in the measurement of inflation.
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3. Explain clearly the demand-pull or excess demand inflation.
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4. Give a clear exposition of supply inflation or cost-push inflation.
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5. Discuss Keynes inflationary gap analysis.
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6. Explain the nature of demand-pull inflation. What measures would you suggest to control such inflation?
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7. Explain the nature of cost-push inflation. What measures would you adopt to control such inflation?
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8. Explain and criticise the monetarist theory of inflation.
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9. Discuss the policies to control inflation.
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Question Type- Bhabesh Bora.
Post ID : DABP005162
