During inflation, the purchasing power of money: MCQ with Answer and Explanation

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During inflation, the purchasing power of money:

A. increases

B. first increases then decreases

C. decreases

D. remains unchanged

Answer: Option C

Solution (By JKSSB Mock Tests)

Inflation reduces the purchasing power of money because each unit buys fewer goods.

This question belongs to: Economy GK Economy Set 1

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Practice More Economy Set 1 Questions

Question #1

If demand for a good is perfectly inelastic, a tax on the good will be borne:

A. equally by buyers and sellers

B. entirely by buyers

C. by the government

D. entirely by sellers

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Correct Answer: Option B

Explanation:
With perfectly inelastic demand, buyers bear the entire tax burden because quantity demanded does not change.

This question belongs to: Economy GK Economy Set 1

Question #2

Which of the following is a feature of the Classical Quantity Theory of Money?

A. Velocity of money is unstable

B. Output is demand-determined

C. Interest rates determine money demand primarily

D. Money is neutral and affects only prices in the long run

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Correct Answer: Option D

Explanation:
In the classical framework, money is neutral in the long run; changes in money supply affect only the price level, not real variables.

This question belongs to: Economy GK Economy Set 1

Question #3

Which of the following is NOT a function of the World Bank?

A. Providing long-term loans for development projects

B. Poverty reduction initiatives

C. Providing short-term balance of payments support

D. Technical assistance for development

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Correct Answer: Option C

Explanation:
Short-term balance of payments support is primarily the function of the IMF. The World Bank focuses on long-term development finance and poverty reduction.

This question belongs to: Economy GK Economy Set 1

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