Chapter:

60+ Currency and Inflation Solved MCQs

in Indian Economy

These multiple-choice questions (MCQs) are designed to enhance your knowledge and understanding in the following areas: Bachelor of Business Administration (BBA) , Bachelor of Arts (BA) , Bachelor of Arts in Economics (BA Economics) , Union Public Service Commission (UPSC) .

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1.	Which of the following are definite implications of a fall in inflation? 1. Prices have fallen 2. Prices are increasing more slowly than before 3. Food supply has increased 4. There is industrial stagnation
A.	1 and 3
B.	1 only
C.	2 only
D.	1, 3 and 4
Answer» C. 2 only

2.	Among the causes of inflation can be listed: 1. slow growth in agricultural output 2. increasing non-development expenditure of Government 3. rapid population growth 4. rapid growth in costly imports
A.	1 and 2
B.	2 and 3
C.	1, 2, 3 and 4
D.	1 and 4 only
Answer» C. 1, 2, 3 and 4

3.	Among the remedies of inflation we cannot include:
A.	better capacity utilisation
B.	lowering bank rate
C.	reducing budgetary deficit
D.	an efficient public distribution system
Answer» B. lowering bank rate

4.	A very rapid growth in prices in which money loses its value to the point where even barter may be preferable is known as:
A.	inflation
B.	hyper-inflation
C.	deflation
D.	disinflation
Answer» B. hyper-inflation

5.	Inflationary Gap is a situation characterized by:
A.	excess of Aggregate Demand over Aggregate Supply at the full employment level
B.	gap between Galloping Inflation and Runaway Inflation
C.	Inflation coupled with recession
D.	Inflation that usually prevails in a developing country
Answer» A. excess of Aggregate Demand over Aggregate Supply at the full employment level

6.	Which of the following is wrongly matched?
A.	Depression: Insufficient demand causing large scale unemployment of men and machinery over a long period of time
B.	Recession: Reduction in demand and production/ investment over a short period of time
C.	Stagflation: slow pace of economic activity due to falling prices
D.	Boom: Rapid and all-round spurt in economic activity
Answer» C. Stagflation: slow pace of economic activity due to falling prices

7.	The cause of inflation is:
A.	increase in money supply
B.	fall in production
C.	increase in money supply and fall in production
D.	decrease in money supply and fall in production
Answer» C. increase in money supply and fall in production

8.	Who among the following is most benefitted from inflation? [IAS 1989]
A.	Government pensioners
B.	Creditors
C.	Savings Bank Account holders
D.	Debtors
Answer» D. Debtors

9.	Which of the following groups suffer the most from inflation? [CPO SI 2003]
A.	Debtors
B.	Creditors
C.	Business class
D.	Holders of real assets
Answer» B. Creditors

10.	Minimum inflation in post economic reform was in :
A.	1999-2000
B.	2000-01
C.	2001-02
D.	2002-03
Answer» A. 1999-2000

11.	Inflation is caused as a result of:
A.	increase in money supply
B.	fall in production
C.	increase in money supply without a corresponding increase in production
D.	decrease in money supply without a corresponding decrease in production
Answer» C. increase in money supply without a corresponding increase in production

12.	Which of the following accounts for Cost-Push Inflation?
A.	Increase in money supply
B.	Increase in indirect taxation
C.	Increase in population
D.	Increase in non-plan expenditure
Answer» B. Increase in indirect taxation

14.	Which of the following governmental steps has proved relatively effective in controlling the double digit rate of inflation in the Indian economy during recent years?
A.	Containing budgetory deficits and unproductive expenditure
B.	Streamlined public distribution system
C.	Enhanced rate of production of all consumer goods
D.	Pursuing an export-oriented strategy
Answer» A. Containing budgetory deficits and unproductive expenditure

15.	Of the various ways of financing government's investment expenditure, the least inflationary is : [PCS 1994]
A.	foreign aid
B.	deficit financing
C.	taxation
D.	public borrowing
Answer» C. taxation

16.	'Devaluation' means: [RRB 1992]
A.	converting rupee into gold
B.	lowering of the value of one currency in comparison of some foreign currency
C.	making rupee dealer in comparison to some foreign currency
D.	None of these
Answer» B. lowering of the value of one currency in comparison of some foreign currency

13.	The inflation experienced in the country at present is:
A.	galloping inflation
B.	secondary inflation
C.	unrealistic inflation
D.	cost-push inflation
Answer» D. cost-push inflation

17.	Monetary policy is regulated by:
A.	money lenders
B.	Central Bank
C.	private entrepreneurs
D.	Government policy
Answer» B. Central Bank

18.	One-rupee currency notes bear the signature of:
A.	Prime Minister of India
B.	President of India
C.	Finance Minister of India
D.	Finance Secretary of India
Answer» D. Finance Secretary of India

19.	Ten rupee notes bear the signature of:
A.	President
B.	Finance Minister
C.	Secretary, Ministry of Finance
D.	Governor, Reserve Bank of India
Answer» D. Governor, Reserve Bank of India

20.	When was the decimal system of currency introduced in India?
A.	1948
B.	1950
C.	1954
D.	1957
Answer» D. 1957

21.	Which of the following prints currency notes of the denomination of Rs. 100?
A.	The Bank Note Press, Dewas
B.	The Indian Security Press, Nasik Road
C.	The Security Printing Press, Hyderabad
D.	All of the above
Answer» A. The Bank Note Press, Dewas

22.	The highest denomination of currency notes in circulation as legal tender in India is at present:
A.	Rs. 50
B.	Rs.100
C.	Rs. 500
D.	Rs.1000
Answer» D. Rs.1000

23.	The special paper required for printing of currency notes by the Security Presses In the country is manufactured at :
A.	Hyderabad
B.	Kolkata
C.	Hoshangabad
D.	Dewas
Answer» C. Hoshangabad

24.	Which of the following mints undertakes refining of gold for licensed gold dealers and production of medals for defence services?
A.	The Hyderabad Mint
B.	The Mumbai Mint
C.	The Kolkata Mint
D.	None of the above
Answer» B. The Mumbai Mint

25.	To meet the growing needs for coins in the country, where does the Government propose to set up another mint?
A.	Nasik
B.	Hoshangabad
C.	Dewas
D.	Noida
Answer» D. Noida

60+ Currency and Inflation Solved MCQs

Which of the following are definite implications of a fall in inflation? 1. Prices have fallen 2. Prices are increasing more slowly than before 3. Food supply has increased 4. There is industrial stagnation

Among the causes of inflation can be listed: 1. slow growth in agricultural output 2. increasing non-development expenditure of Government 3. rapid population growth 4. rapid growth in costly imports

Among the remedies of inflation we cannot include:

A very rapid growth in prices in which money loses its value to the point where even barter may be preferable is known as:

Inflationary Gap is a situation characterized by:

Which of the following is wrongly matched?

The cause of inflation is:

Who among the following is most benefitted from inflation? [IAS 1989]

Which of the following groups suffer the most from inflation? [CPO SI 2003]

Minimum inflation in post economic reform was in :

Inflation is caused as a result of:

Which of the following accounts for Cost-Push Inflation?

The inflation experienced in the country at present is:

Which of the following governmental steps has proved relatively effective in controlling the double digit rate of inflation in the Indian economy during recent years?

Of the various ways of financing government's investment expenditure, the least inflationary is : [PCS 1994]

'Devaluation' means: [RRB 1992]

Monetary policy is regulated by:

One-rupee currency notes bear the signature of:

Ten rupee notes bear the signature of:

When was the decimal system of currency introduced in India?

Which of the following prints currency notes of the denomination of Rs. 100?

The highest denomination of currency notes in circulation as legal tender in India is at present:

The special paper required for printing of currency notes by the Security Presses In the country is manufactured at :

Which of the following mints undertakes refining of gold for licensed gold dealers and production of medals for defence services?

To meet the growing needs for coins in the country, where does the Government propose to set up another mint?

For international payments, the Indian currency is linked to :

How many languages are used on a ten rupee note?

Convertibility of the rupee implies: [IAS 1994]

Black money is :

Broad money in India is :

The Issue Department of the RBI maintains a _______ against printing of notes:

Devaluation of currency by a country is meant to lead to : 1. expansion of import trade 2. promotion of import substitution 3. expansion of export trade

Which of the following is incorrect about convertibility?

The States' debt does not include:

Hard Currency is defined as currency:

The Indian Rupee is fully convertible: 1. In respect of Current Account of Balance of Payments 2. In respect of Capital Account of Balance of Payments 3. Into Gold Which of these statements is/are correct ?

Inflation implies: [Railways 1994]

The situation with increasing unemployment and inflation is termed as: [CPO AC 2003]

Which of the following factors contributes to an inflationary trend?

Which of the following can be used for checking inflation temporarily?

Who among the following are not protected against inflation.? [Railways 1992]

An essential attribute of inflation is:

The best means of saving during inflation is to keep:

The period of high inflation and low economic growth is termed as: [RRB 1992]

Stagflation implies a case of: [CDS 1992]

Inflation can be contained by:

Deficit financing creates additional paper currency to fill the gap between expenditure and revenue. This device aims at economic development but if it fails, it generates : [IFS 1990]

A steady increase in the general level of prices as a result of excessive increase in aggregate demand as compared to aggregate supply is termed as : [CDS 1999]

Which of the following are definite implications of a fall in inflation?
1. Prices have fallen
2. Prices are increasing more slowly than before
3. Food supply has increased
4. There is industrial stagnation

Among the causes of inflation can be listed:
1. slow growth in agricultural output
2. increasing non-development expenditure of Government
3. rapid population growth
4. rapid growth in costly imports

The Indian Rupee is fully convertible:
1. In respect of Current Account of Balance of Payments
2. In respect of Capital Account of Balance of Payments
3. Into Gold
Which of these statements is/are correct ?

26.	For international payments, the Indian currency is linked to :
A.	American Dollar
B.	British Sterling
C.	Gold Standard
D.	None of the above
Answer» A. American Dollar

27.	How many languages are used on a ten rupee note?
A.	2
B.	7
C.	10
D.	15
Answer» D. 15

28.	Convertibility of the rupee implies: [IAS 1994]
A.	being able to convert rupee notes into gold
B.	freely permitting the conversion of rupee to other major currencies and vice versa
C.	allowing the value of the rupee to be fixed by market forces
D.	developing an international market for currencies in India
Answer» B. freely permitting the conversion of rupee to other major currencies and vice versa

29.	Black money is :
A.	counterfeit currency
B.	illegally earned money
C.	money earned through underhand deals
D.	income on which payment of tax is usually evaded
Answer» D. income on which payment of tax is usually evaded

31.	The Issue Department of the RBI maintains a _______ against printing of notes:
A.	Minimum Reserve System
B.	Proportional Reserve System
C.	Proportional Gold Reserve System
D.	Proportional Foreign Securities Reserve System
Answer» A. Minimum Reserve System

33.	Which of the following is incorrect about convertibility?
A.	The exchange rate should be determined by the forces of demand and supply of the currency
B.	The exchange rate' would indicate the strength of the economy
C.	It would discourage black market transactions
D.	The RBI will be a direct player now rather than being an indirect one
Answer» D. The RBI will be a direct player now rather than being an indirect one

34.	The States' debt does not include:
A.	loans from State Bank of India
B.	loans from the Central Government
C.	Provident Funds
D.	treasury bills issued to international financial institutions
Answer» D. treasury bills issued to international financial institutions

35.	Consider the following statement: The price of any currency in international market is determined by the: 1. WTO 2. Demand for goods/services provided by the country concerned 3. Inflation differential between the country concerned and its major trading partners 4. Stability of the government of the concerned country Of these statements:
A.	1, 2, 3, and 4 are correct
B.	1, 2 and 4 are correct
C.	1, 3 and 4 are correct
D.	2, 3 and 4 are correct
Answer» D. 2, 3 and 4 are correct

36.	Hard Currency is defined as currency:
A.	which can hardly be used for international transactions
B.	which is used in times of war
C.	which loses its value very fast
D.	traded in foreign exchange market for which demand is persistently relative to the supply
Answer» D. traded in foreign exchange market for which demand is persistently relative to the supply

37.	The Indian Rupee is fully convertible: 1. In respect of Current Account of Balance of Payments 2. In respect of Capital Account of Balance of Payments 3. Into Gold Which of these statements is/are correct ?
A.	1 only
B.	3 only
C.	1 and 2 only
D.	1, 2 and 3
Answer» A. 1 only