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

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During inflation, the purchasing power of money:

A. first increases then decreases

B. increases

C. remains unchanged

D. decreases

Answer: Option D

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

The term 'Repo Rate' refers to the rate at which:

A. Commercial banks lend to RBI

B. RBI borrows from commercial banks

C. Government borrows from RBI

D. RBI lends to commercial banks against securities

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Correct Answer: Option D

Explanation:
Repo rate is the rate at which the Reserve Bank of India lends money to commercial banks against government securities for short-term needs.

This question belongs to: Economy GK Economy Set 1

Question #2

Crowding out occurs when:

A. government borrowing reduces private investment

B. government expenditure increases private investment

C. taxes are reduced

D. private investment reduces government spending

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Correct Answer: Option A

Explanation:
Crowding out occurs when increased government borrowing raises interest rates and reduces private investment.

This question belongs to: Economy GK Economy Set 1

Question #3

In the context of international finance, 'Bretton Woods Institutions' refer to:

A. WTO and UNCTAD

B. OECD and G20 only

C. ADB and AIIB

D. IMF and World Bank

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Correct Answer: Option D

Explanation:
The Bretton Woods Conference (1944) led to the creation of the International Monetary Fund and the World Bank (IBRD).

This question belongs to: Economy GK Economy Set 1

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