This set covers how inflation is measured and classified, the main types of unemployment, and how poverty has been estimated in India. Prelims often tests definitions such as stagflation and disinflation and the work of poverty committees.
How to practise: read each question and tap the option you think is correct. You will see right away whether you got it, along with a short explanation, and your score is tracked at the bottom of the screen. This set has 15 questions.
Topics covered in this set
- Demand-pull and cost-push inflation
- Stagflation, disinflation and core inflation
- CPI and WPI
- Phillips curve
- Types of unemployment and PLFS
- Poverty committees and multidimensional poverty
UPSC Economy MCQs with answers and explanations
Q1. Demand-pull inflation is caused mainly by:
a) A rise in the cost of raw materials
b) Aggregate demand exceeding the available supply of goods and services
c) A fall in money supply
d) Higher productivity of labour
Q2. A sharp rise in international crude oil prices leading to a general rise in prices is an example of:
a) Demand-pull inflation
b) Deflation
c) Cost-push inflation
d) Disinflation
Q3. Stagflation refers to a situation of:
a) High growth with low inflation
b) Falling prices with high growth
c) Rising prices with stagnant output and high unemployment
d) Stable prices with full employment
Q4. Disinflation means:
a) A decline in the rate of inflation while prices still rise
b) A fall in the general price level
c) A rise in inflation after a recession
d) Very high inflation exceeding 50 percent a month
Q5. Core inflation is generally measured by excluding which of the following from the headline index?
a) Housing and education
b) Clothing and footwear
c) Health and transport
d) Food and fuel
Q6. The Wholesale Price Index (WPI) in India is released by:
a) The Reserve Bank of India
b) The National Statistics Office
c) The Office of the Economic Adviser, Department for Promotion of Industry and Internal Trade
d) The Labour Bureau
Q7. Which of the following statements about the Wholesale Price Index is correct?
a) It does not cover services
b) It is used by the RBI as its inflation target
c) It is compiled separately for rural and urban areas
d) It gives the highest weight to services
Q8. Under India's flexible inflation targeting framework, the inflation target is defined in terms of:
a) Wholesale Price Index
b) GDP deflator
c) Core inflation
d) Consumer Price Index (Combined)
Q9. The Phillips curve shows:
a) A short-run inverse relationship between inflation and unemployment
b) A direct relationship between tax rates and revenue
c) The relationship between income and inequality
d) A positive relationship between interest rates and investment
Q10. Disguised unemployment is most commonly found in:
a) The information technology sector
b) Agriculture in developing countries
c) Large manufacturing firms
d) Government banks
Q11. Unemployment that occurs when workers are temporarily between jobs is called:
a) Structural unemployment
b) Seasonal unemployment
c) Disguised unemployment
d) Frictional unemployment
Q12. The Periodic Labour Force Survey (PLFS) is conducted by:
a) NITI Aayog
b) National Statistics Office
c) Reserve Bank of India
d) Ministry of Finance
Q13. Which of the following is correct about the Tendulkar committee methodology for poverty estimation?
a) It used separate consumption baskets for rural and urban areas
b) It relied only on calorie intake norms
c) It moved away from calorie norms and used a uniform consumption basket for rural and urban areas
d) It measured poverty using income tax data
Q14. India's national Multidimensional Poverty Index prepared by NITI Aayog uses which three dimensions?
a) Income, wealth and consumption
b) Health, education and standard of living
c) Employment, housing and income
d) Nutrition, sanitation and income
Q15. Which committee on poverty estimation submitted its report in 2014?
a) Lakdawala committee
b) Tendulkar committee
c) Rangarajan committee
d) Alagh task force
Quick revision notes
- Demand-pull inflation comes from excess demand; cost-push inflation comes from rising input costs.
- Disinflation is a fall in the rate of inflation; deflation is a fall in the price level.
- WPI is released by the Office of the Economic Adviser, DPIIT and does not cover services.
- The RBI's inflation target is based on headline CPI (Combined).
- The Phillips curve shows a short-run inverse relation between inflation and unemployment.
- Poverty committees in order: Alagh (1979), Lakdawala (1993), Tendulkar (2009), Rangarajan (2014).
Frequently asked questions
What is the difference between CPI and WPI?
CPI measures retail prices paid by consumers and includes services. WPI measures prices at the wholesale level and covers only goods, so it does not reflect the cost of services.
Why is stagflation difficult for policymakers?
Tightening policy to reduce inflation can deepen the slowdown and raise unemployment. Loosening policy to support growth can push inflation higher.
How is the Multidimensional Poverty Index different from a poverty line?
A poverty line uses a single money threshold based on consumption or income. The MPI looks at several deprivations at once in health, education and living standards.
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