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One common undercurrent among the questions related to inflation is that it is all related to the concept of inflation and the phenomenon with respect to India. Basic understanding of concepts here will help you answer any question, irrespective of whether it’s direct or slightly twisted. One needs to be thorough with various indices of measuring inflation for the coming exam.


  1. Types of inflation
  2. Causes of Inflation
  3. Base effect
  4. Measuring inflation
  5. GDP deflator
  6. WPI
  7. CPI
  8. PPI
  9. Effects of inflation
  10. Effects of Deflation
  11. Who controls Inflation in India
  12. Measures to Control Inflation
  13. Indian Scenario: Rates of Inflation in India.
  14. Basics of Demand and Supply  
  • Sanjeev Verma – Unique Publishers –Chapter 14   
  • Introduction to Macroeconomics- NCERT Class XII- Chapter 2 [Section 2.4]    
  • Ramesh Singh 5th edition –Chapter 7       
  • Economic Survey [2015-2016]
  • Demand and Supply can be learned from Micro Economics NCERT Class 12.    

[2011 Prelims]

1)India has experienced persistent and high food inflation in the recent past. What could be the reasons?

  1. Due to a gradual switchover to the cultivation of commercial crops, the area under the cultivation of food grains has steadily decreased in the last 5 years by about 30 %.
  2. As a consequence of increasing incomes, the consumption patterns of the people have undergone a significant change.
  3. The food supply chain has structural constraints.

Which of the statements given above are correct?

  1. 1,2
  2. 2,3
  3. 1,3
  4. 1,2,3

2)A rapid increase in the rate of inflation is sometimes attributed to the “base effect”. What is base effect?

  1. It is the impact of drastic deficiency in supply due to failure of crops.
  2. It is the impact of the surge in demand due to rapid economic growth.
  3. It is the impact of the price levels of previous year on the calculations of inflation rate.
  4. None of the above.

3)Economic growth is usually coupled with

  1. Deflation
  2. Inflation
  3. Stagflation
  4. Hyperinflation

[2013 Prelims]

1) Consider the following statements

  1. Inflation benefits debtors
  2. Inflation benefits the bond-holders.

Which of the statements given above is/are correct?

  1. 1 only
  2. 2 only
  3. Both
  4. None.

2)A rise in general level of prices may be caused by

  1. An increase in the money supply
  2. A decrease in the aggregate level of output.
  3. An increase in the effective demand.

Select the correct answer using the codes given below.

  1. 1 only
  2. 1 ,2
  3. 2,3
  4. 1,2,3

3)Supply of money remaining the same when there is an increase in demand for money there will be

  1. A fall in the level of prices
  2. An increase in the rate of interest.
  3. A decrease in the rate of interest.
  4. An increase in the level of income and employment.

[2015 Prelims]

1)With reference to inflation in India, which of the following statements is correct?

  1. Controlling inflation in India is the responsibility of the Government of India only.
  2. The RBI has no role in controlling the inflation
  3. Decreased money circulation helps in controlling the inflation.
  4. Increased money circulation helps in controlling the inflation.

2)Which of the following brings out the ‘Consumer Price Index Number’ for Industrial Workers?

  1. RBI
  2. The Department of Economic Affairs
  3. The Labour Bureau
  4. Department of Personnel and Training.